QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2013

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to

Commission file number 001-35214

API
TECHNOLOGIES CORP.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

98-0200798

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

4705 S. Apopka Vineland Rd. Suite 210

Orlando, FL 32819

(Address of Principal Executive Offices)

(407) 876-0279

(Registrants Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 and 15(d) of the Exchange
Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company (as defined Rule 12b-2 of the Exchange Act).

Large Accelerated Filer

¨

Accelerated Filer

x

Non-Accelerated Filer

¨

Smaller reporting company

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ¨ No x

State the number of shares outstanding of each of the issuers class of common equity as of the latest practicable date:

54,846,135 shares of common stock with a par value of $0.001 per share at October 1, 2013.

API Technologies
Corp. (API, and together with its subsidiaries, the Company) designs, develops and manufactures high reliability engineered solutions, RF, power systems management technology, systems, secure communications and electronic
components for military and aerospace applications, including mission critical information systems and technologies.

Prior to the third quarter of 2012,
the Company reported in two business segments: Systems & Subsystems and Secure Systems & Informational Assurance. To better highlight to investors its profitability and product offerings, the Company made organizational changes
that have resulted in changes to the way in which the Companys Chief Operating Decision Maker manages and evaluates the business. For this reason and in accordance with authoritative guidance, beginning with the quarter ended August 31,
2012, the Company redefined its reportable operating segments. The Electronic Manufacturing Services (EMS) business (formerly part of the Systems & Subsystems segment) is now reported as a separate segment, as this more closely
aligns with the Companys management organization and strategic direction. The Company also renamed the Systems & Subsystems segment to Systems, Subsystems & Components (SSC) to more accurately describe the product
offering of this segment. There were no changes to the Secure Systems & Information Assurance (SSIA) segment. Prior periods have been revised to conform with the new segments: SSC, EMS and SSIA.

On July 5, 2013, the Company entered into an agreement (the APA) with ILC Industries, LLC (Parent) and Data Device Corporation, a
Delaware corporation and a wholly owned subsidiary of Parent (the Purchaser) pursuant to which the Company sold to the Purchaser certain assets comprising the Companys data bus business (Databus) in the U.S. and the
U.K., including substantially all of the assets the Companys wholly owned subsidiary, National Hybrid, Inc., a New York corporation (the Asset Sale). The Purchaser paid the Company approximately $32,150 in cash for the assets,
after certain adjustments based on closing inventory values as set forth in the APA and customary indemnification provisions. Substantially all of the proceeds from the Asset Sale were used to repay certain of the Companys outstanding debt.

On April 17, 2013 the Company sold all of the issued and outstanding shares of capital stock or other equity interests of Spectrum Sensors and
Controls, Inc., a Pennsylvania corporation (Sub 1), Spectrum Sensors and Controls, LLC, a California limited liability company (Sub 2), and Spectrum Sensors and Controls, Inc., an Ohio corporation (Sub 3 and
together with Sub 1 and Sub 2, Sensors), for gross cash proceeds of approximately $51,350. Of this amount, $1,500 was placed into an escrow account for 12 months to secure any indemnification claims made by the purchaser against the
sellers, API and Spectrum Control, Inc. (Spectrum), a wholly owned subsidiary of API.

On March 22, 2012, API completed the acquisition,
through its UK-based subsidiary API Technologies (UK) Limited (API UK), of the entire issued share capital of C-MAC Aerospace Limited (C-MAC), for a total purchase price of £20,950 pounds sterling (approximately $33,000
USD), including the assumption of C-MACs loan facility (see Note 4a). C-MAC is a leading provider of high-reliability electronic systems, modules, and components to the defense, aerospace, space, industrial and energy sectors.

On March 19, 2012, API completed the acquisition of substantially all of the assets of RTI Electronics (RTIE) for a total purchase price of
$2,295, with $1,500 payable in cash at closing and the remainder pursuant to a $795 Promissory Note payable in 24 equal monthly installments (see Note 4b). Based in Anaheim, California, RTIE is a leading manufacturer of passive electronic
components, including thermistors, film capacitors, magnetic transformers and inductors, and audio power conditioning units. RTIE had revenues for the year ended December 31, 2011 of approximately $5,300 from a diverse Fortune 500 customer base
spanning the audio, defense, aerospace, and industrial markets.

The unaudited consolidated financial statements include the accounts of API and its
wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. There are no other entities controlled by the Company, either directly or indirectly. The financial statements
have been prepared in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the SEC). Accordingly, certain information and footnote disclosures required in financial
statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. In the opinion of the Companys management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for the fair presentation of the Companys consolidated financial position as of August 31, 2013 and the
results of its operations and cash flows for the nine month period ended August 31, 2013. Results for the interim period are not necessarily indicative of results that may be expected for the entire year or for any other interim periods. The
unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company and the notes thereto as of and for the year ended November 30, 2012 included in the Companys Form
10-K filed with the SEC on February 12, 2013.

The preparation
of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts in the consolidated financial
statements, and the disclosures made in the accompanying notes. Examples of estimates include the provisions made for bad debts and obsolete inventory, estimates associated with annual goodwill impairment tests, and estimates of deferred income tax
and liabilities. The Company also uses estimates when assessing fair values of assets and liabilities acquired in business acquisitions as well as any fair value and any related impairment charges related to the carrying value of machinery and
equipment, other long-lived assets, fixed assets held for sale and discontinued operations. The Company also uses estimates in determining the remaining economic lives of long-lived assets. In addition, the Company uses assumptions when employing
the Black-Scholes valuation model to estimate the fair value of share options. Despite the Companys intention to establish accurate estimates and use reasonable assumptions, actual results may differ from these estimates.

Inventories

Inventories, which include materials, labor,
and manufacturing overhead, are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. The Company records a provision for both excess and obsolete inventory when write-downs or write-offs are identified. The inventory
valuation is based upon assumptions about future demand, product mix and possible alternative uses.

The Company periodically reviews and analyzes its
inventory management systems and conducts inventory impairment testing on an annual basis.

Fixed Assets

Fixed assets are recorded at cost less accumulated depreciation and are depreciated using the following methods over the following periods:

Straight line basis

Buildings and leasehold improvements

5-40 years

Computer equipment

3-5 years

Furniture and fixtures

5-8 years

Machinery and equipment

5-10 years

Vehicles

3 years

Betterments are capitalized and amortized by the Company, using the same amortization basis as the underlying assets over the
remaining useful life of the original asset. Betterments include renovations, major repairs and upgrades that increase the service of a fixed asset and extend the useful life. Gains and losses on depreciable assets retired or sold are recognized in
the consolidated statements of operations in the year of disposal. Repairs and maintenance expenditures are expensed as incurred.

Fixed Assets Held
for Sale

Certain fixed assets held for sale from within our SSC segment have been classified as held for sale in the consolidated balance sheets. The
Company estimated the fair value of the net assets to be sold at approximately $150 at August 31, 2013 compared to $900 at November 30, 2012. On March 14, 2013, the Company sold certain land and a building in Palm Bay, Florida from
the Spectrum acquisition for net proceeds of $739. This land and building were part of the fixed assets held for sale reported at November 30, 2012.

Discontinued Operations

Components of the Company that
have been disposed of are reported as discontinued operations. The assets and liabilities relating to the Companys Databus business and Sensors companies have been reclassified as discontinued operations in the consolidated balance sheets for
fiscal 2012 and the results of operations of Databus and Sensors for the current and prior periods are reported as discontinued operations (Note 5) and not included in the continuing operations figures.

Goodwill and Intangible Assets

Goodwill and intangible
assets result primarily from business acquisitions accounted for under the purchase method. Goodwill and intangible assets with indefinite lives are not amortized but are subject to impairment by applying a fair value based test. The Company
completes an annual (or more often if circumstances require) impairment assessment of its goodwill on a reporting unit level. The Companys annual impairment test for goodwill is
September 1st.

The Company has three reporting units: (i) SSC, (ii) EMS, and (iii) SSIA. The goodwill in the
consolidated financial statements relates to the acquisition of RTIE in March 2012, C-MAC in March 2012, CMT in November 2011, Spectrum in June 2011, SenDEC Corp. (SenDEC) in January 2011, the acquisition of the assets of Kuchera Defense
Systems, Inc. (KDS), KII, Inc. (KII) and Kuchera Industries, LLC (KI Industries and collectively with KDS and KII, the KGC Companies) by API and three of its subsidiaries (the API Pennsylvania
Subsidiaries), in January 2010, and the acquisition of the Filtran Group companies, which was completed in 2002. All of the goodwill relates to our SSC reporting unit, except for SenDEC and the KGC Companies, which relate to the EMS reporting
unit. Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value assigned to the individual assets acquired and liabilities assumed. The Company does not amortize goodwill but instead tests goodwill for
impairment annually (on September 1) or more frequently if impairment indicators arise under the applicable accounting guidance.

A two-step test is
performed to assess goodwill impairment. First, the fair value of each reporting unit is compared to its carrying value. The fair value is determined based on a market approach as well as the discounted future cash flows of the subsidiary carrying
the goodwill. If the calculated fair value exceeds the carrying value of the assets, goodwill is not impaired and no further testing is performed. The second step is performed if the carrying value exceeds the fair value of the goodwill. If the
carrying value of the reporting units goodwill exceeds its implied fair value, an impairment loss equal to the difference is recorded.

As at
May 31, 2012, given lower than projected revenues and the Companys outlook for the EMS portion of the Systems & Subsystems segment (now the EMS segment), the Company determined that the appropriate triggers had been reached to
perform an impairment test beyond the annual goodwill impairment test. The Company performed the first step of the goodwill impairment assessment and the carrying value of the assets exceeded the fair value. As of the date of filing the 10-Q for
May 31, 2012, the Company determined that an impairment of goodwill was probable, determined a reasonable estimate and therefore recorded a write-down of $87,000. During the third quarter of fiscal 2012, the Company completed its impairment
analysis and determined that an additional $24,300 write-down of goodwill was required.

Following the required accounting guidance, the Company performed
the first step of the two-step test method based on discounted future cash flows on September 1, 2012. The respective reporting units future cash flows exceeded the carrying value of the underlying assets and therefore goodwill was not
impaired and no further testing was required for the year ending November 30, 2012.

As at April 17, 2013, given the sale of Sensors, which was
part of the SSC segment, the Company determined that the appropriate triggers had been reached to perform an impairment test beyond the annual goodwill impairment test. The Company performed the first step of the goodwill impairment assessment and
the carrying value of the assets exceeded the fair value of the assets and determined that an impairment of goodwill had not occurred.

As at July 5,
2013, given the sale of Databus, which also was part of the SSC segment, the Company determined that the appropriate triggers had been reached to perform an impairment test beyond the annual goodwill impairment test. The Company performed the first
step of the goodwill impairment assessment and the carrying value of the assets exceeded the fair value of the assets. As of the date of the filing of this report, the Company determined that an impairment of goodwill had not occurred.

Intangible assets that have a finite life are amortized using the following basis over the following periods:

Non-compete agreements

Straight line over 5 years

Computer software

Straight line over 3-5 years

Customer related intangibles

Straight line or the pattern in which the economic benefits are expected to be realized, over an estimated life of 4-15 years

Marketing related intangibles

The pattern in which the economic benefits are expected to be realized, over an estimated life of 3-10 years

Technology related intangibles

The pattern in which the economic benefits are expected to be realized, over an estimated life of 10 years

Long-Lived Assets

The
Company periodically evaluates the net realizable values of long-lived assets, principally identifiable intangibles and capital assets, for potential impairment when events or changes in circumstances indicate that the carrying amount of such assets
may not be recoverable, as determined based on the estimated future undiscounted cash flows. If such assets were considered to be impaired, the carrying value of the related assets would be reduced to their estimated fair value.

Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial reporting and tax bases
of assets and liabilities and available net operating loss carry forwards. A valuation allowance is established to reduce tax assets if it is more likely than not that all or some portions of such tax assets will not be realized.

The Companys valuation allowance was recorded on the deferred tax assets to provide for a reasonable provision, which in the Companys estimation
is more likely than not that all or some portions of such tax assets will not be realized. In determining the adequacy of the valuation allowance, the Company applied the authoritative guidance and considered such factors as (i) which
subsidiaries were producing income and which subsidiaries were producing losses and (ii) temporary differences occurring from depreciation and amortization which the Company expects to increase the taxable income over future periods.

The Company follows the guidance concerning accounting for uncertainty in income taxes, which clarifies the accounting and disclosure for uncertainty in tax
positions. The guidance requires that the Company determine whether it is more likely than not that a tax position will not be sustained upon examination by the appropriate taxing authority. If a tax position does not meet the more likely than not
recognition criterion, the guidance requires that the tax position be measured at the largest amount of benefit greater than 50 percent not likely of being sustained upon ultimate settlement.

Based on the Companys evaluation, management has concluded that there are no significant uncertain tax positions requiring recognition in the
consolidated financial statements or adjustments to deferred tax assets and related valuation allowance. Open tax years include the tax years ended May 31, 2008 through November 30, 2012.

The Company from time to time has been assessed interest or penalties by major tax jurisdictions, however such assessments historically have been minimal and
immaterial to our financial results. If the Company receives an assessment for interest and/or penalties, it would be classified in the consolidated financial statements as general and administrative expense.

Revenue Recognition

The Company recognizes non-contract
revenue when it is realized or realizable and earned. The Company considers non-contract revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable,
and collectability is reasonably assured. Delivery is not considered to have occurred until products have been shipped and risk of loss and ownership has transferred to the client. Revenue from production-type contracts, which represents less than
one per cent of total revenue, is recognized using the percentage of completion method. The degree of completion is determined based on costs incurred, excluding costs that are not representative of progress to completion, as a percentage of total
costs anticipated for each contract. A provision is made for losses on contracts in progress when such losses first become known. Revisions in cost and profit estimates, which can be significant, are reflected in the accounting period in which the
relevant facts become known. Revenue from contracts under the percentage of completion method is not significant to the financial statements.

Deferred
Revenue

The Company defers revenue when payment is received in advance of the service or product being shipped or delivered, including transition
services agreements related to discontinued operations. For some of the larger government contracts, the Company will bill upon meeting certain milestones. These milestones are established by the customer and are specific to each contract. Unearned
revenue is recorded as deferred revenue. The Company generally recognizes revenue on the contracts when items are shipped.

Research and Development

Research and development costs are expensed when incurred.

Stock-Based Compensation

The Company follows the
authoritative guidance for accounting for stock-based compensation. The guidance requires that new, modified and unvested stock-based payment transactions with employees, such as grants of stock options, restricted stock units (RSUs) and
restricted stock, be recognized in the financial statements based on their fair value at the grant date and recognized as compensation expense over their vesting periods. Stock-based compensation cost for RSUs is measured based on the closing fair
market value of the Companys common stock on the date of grant. The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model which takes into account as of the grant date the exercise price
and expected life of the option, the current price of the underlying shares and its expected volatility, expected dividends on the shares and the risk-free interest rate for the term of the option.

The Companys functional currency is United States dollars and the consolidated financial statements are stated in United States dollars, the
reporting currency. Integrated operations have been translated from various foreign currencies (Canadian dollars, British Pounds Sterling, Chinese Yuan, Euros, and Mexican Pesos) into United States dollars at the period-end exchange rate for
monetary balance sheet items, the historical rate for fixed assets and shareholders equity, and the average exchange rate for the year for revenues, expenses, gains and losses. The gains or losses on translation are included as a component of
other comprehensive income (loss) for the period.

Financial Instruments

The fair values of financial instruments including cash and cash equivalents, marketable securities, accounts receivable, accounts payable, and short-term
borrowings approximate their carrying values due to the short-term nature of these instruments. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest rate, currency or credit risks arising
from its financial instruments. Marketable securities are included at fair value based on quoted market prices in active markets. The recorded value of long-term debt approximates the fair value of the debt as the terms and rates approximate market
rates.

In the ordinary course of business, the Company carries out transactions in various foreign currencies (Canadian Dollars, British Pounds Sterling,
Chinese Yuan, Euros, and Mexican Pesos) included in the Companys cash, accounts receivable, accounts payable, bank indebtedness, as well as a mortgage loan. The translation adjustments related to these accounts have been reflected as a
component of comprehensive income. Currently, the Company does not maintain a foreign currency hedging program.

Derivative Liabilities

Fair value accounting requires bifurcation of embedded derivative instruments of convertible debt or equity instruments, and measurement of their fair value
for accounting purposes. The Companys embedded derivative instruments such as put and call features, make whole provisions and default interest and dividend rates in the convertible note and convertible preferred stock are measured at fair
value using the discounted cash flows model by taking the present value of probability weighted cash flow scenarios. Derivative liabilities are adjusted to reflect fair value at the end of each reporting period, with any change in the fair value
being recorded in results of operations as Other expense (income), net.

Debt Issuance Costs and Long-term Debt Discounts

Fees paid to obtain debt financing or amendments under such debt financing are treated as debt issuance costs and are capitalized and amortized over the life
of the debt using the effective interest method. These payments are shown as a financing activity on the consolidated statement of cash flows and are shown as Other non-current assets in the consolidated balance sheets.

In accordance with accounting standards, the Company recognized the value of detachable warrants issued in conjunction with the issuance of the secured
promissory notes and the modification of the convertible promissory notes. The Company valued the warrants using the Black-Scholes pricing model. The Company recorded the warrant relative fair value as an increase to additional paid-in capital and a
discount against the related debt. The discount attributed to the value of the warrants was being amortized over the term of the underlying debt using the effective interest method and was written off when the related debt was extinguished.

The Company may record debt and equity discounts in connection with raising funds through the issuance of convertible notes or equity instruments. These
discounts may arise from (i) the receipt of proceeds less than the face value of the convertible notes or equity instruments, (ii) beneficial conversion features and/or (iii) recording derivative liabilities related to embedded
features. These costs are amortized over the life of the debt to interest expense utilizing the effective interest method. If a conversion of the underlying debt occurs, a proportionate share of the unamortized discount is immediately expensed.

Concentration of Credit Risk

The Company maintains cash
balances, at times, with financial institutions, which are in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC), Canadian Deposit Insurance Corporation (CDIC) and Financial Services Compensation Scheme (FSCS in the United
Kingdom). Management monitors the soundness of these institutions and has not experienced any collection losses with these institutions.

The US, Canadian
and United Kingdom Governments Departments of Defense (directly and through subcontractors) accounts for approximately 48%, 2% and 8% of the Companys revenues for the nine months ended August 31, 2013 (44%, 3% and 9% for the nine
months ended August 31, 2012), respectively. A loss of a significant customer could adversely impact the future operations of the Company.

Basic earnings per share of common stock is computed by dividing income by the weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share of common stock gives effect to all dilutive potential shares of common stock outstanding during the period. The computation of diluted earnings per share does not assume conversion, exercise or contingent exercise of
securities that would have an anti-dilutive effect on earnings per share (Note 16).

Comprehensive Income (Loss)

Comprehensive income (loss), which includes foreign currency translation adjustments is shown in the Consolidated Statement of Operations and Comprehensive
Income (Loss).

Comparative Reclassifications

Certain amounts from 2012 have been reclassified to conform to the August 31, 2013 financial statement presentation. The reclassifications related to the
restatement of discontinued operations (see Note 5) and a change in the balance sheet presentation of deferred financing costs incurred directly with the lenders of long-term debt.

3. EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

During the second quarter of 2011, the FASB issued guidance that provides two alternatives for the presentation of other comprehensive income, either
(i) present items of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income or (ii) present items of other comprehensive income in a separate statement immediately
following the statement of net income. Under either presentation method, amounts reclassified from other comprehensive income to net income and totals for net income, other comprehensive income, and comprehensive income will be presented. This
guidance does not change the items that are reported in net income and other comprehensive income or the calculation of earnings per share. The Company adopted this guidance effective December 1, 2012, and included retrospective application for
all periods presented.

4. ACQUISITIONS

a) C-MAC

On March 22, 2012, the
Company completed the acquisition, through its UK-based subsidiary API UK, of the entire issued share capital of C-MAC Aerospace Limited (C-MAC), for a total purchase price of £20,950 pounds sterling (approximately $33,000 USD),
consisting of i) the payment at closing of £19,250 pounds sterling (approximately $30,300 USD) and ii) the assumption of C-MACs term loan facility of £1,700 pounds sterling (approximately $2,700 USD) (see Note 11e). C-MAC was a
leading provider of high-reliability electronic systems, modules, and components to the defense, aerospace, space, industrial and energy sectors. The acquisition expanded the Companys RF and Microwave and microelectronics capabilities and the
Company believes that additional revenue opportunities will be generated through cross selling, C-MACs European based operation and APIs expansion into international markets. These factors contributed to a purchase price resulting in the
recognition of goodwill. On May 31, 2012, C-MAC Aerospace Limited changed its name to RF2M Limited (RF2M UK).

The Company has accounted
for the acquisition using the purchase method of accounting in accordance with the guidance on business combinations. The Company also incurred legal costs, reorganization charges and professional fees in connection with the acquisition of
approximately $1,586 as of November 30, 2012. These expenses have been accounted for as operating expenses. The results of operations of C-MAC have been included in the Companys results of operations beginning on March 22, 2012.

Accounting guidance requires that identifiable assets acquired and liabilities assumed be reported at fair value as of the acquisition date of a business
combination. Assets and liabilities acquired were as follows:

The fair value of C-MAC exceeded the underlying fair value of all net assets acquired, giving rise to the
goodwill. The resulting goodwill will be non-deductible for tax purposes. Customer, marketing and technology related intangibles are amortized based on the pattern in which the economic benefits are expected to be realized, over estimated lives of
three to ten years.

Revenues and net income of RF2M UK for the nine months ended August 31, 2013 were approximately $23,193 and $797, respectively.
Revenues and net loss of RF2M UK for the period from the acquisition of March 22, 2012 to November 30, 2012 were approximately $25,336 and $(1,403), respectively.

Fixed assets acquired in this transaction consist of the following:

(in thousands)

Land

$

155

Buildings and leasehold improvements

1,415

Computer equipment

280

Furniture and fixtures

70

Machinery and equipment

3,504

Vehicles

8

Total fixed assets acquired

$

5,432

b) RTIE

On
March 19, 2012, the Company completed the acquisition of substantially all of the assets of RTIE for a total purchase price of $2,295, with $1,500 payable in cash at closing and the remainder pursuant to a $795 Promissory Note payable in 24
equal monthly installments. Based in Anaheim, California, RTIE is a leading manufacturer of passive electronic components, including thermistors, film capacitors, magnetic transformers and inductors, and audio power conditioning units. RTIE had
revenues for the year ended December 31, 2011 of approximately $5,300 from a diverse Fortune 500 customer base spanning the audio, defense, aerospace, and industrial markets. The acquisition expands the Companys RF and Microwave
capabilities and the Company believes that its low-cost manufacturing capabilities and established sales channels will provide additional revenue opportunities and improved profitability for RTIE products. These factors contributed to a purchase
price resulting in the recognition of goodwill.

The Company has accounted for the acquisition using the purchase method of accounting in accordance with
the guidance on business combinations. The Company also incurred legal, travel and relocation costs, reorganization charges and professional fees in connection with the acquisition of approximately $769 as of November 30, 2012. These expenses
have been accounted for as operating expenses. The results of operations of RTIE have been included in the Companys results of operations beginning on March 19, 2012.

Accounting guidance requires that identifiable assets acquired and liabilities assumed be reported at fair value as of the acquisition date of a business
combination. Assets and liabilities acquired were as follows:

(in thousands)

Inventory

$

275

Fixed assets

82

Goodwill

2,177

Current liabilities

(225

)

Deferred revenue

(14

)

Fair value of net assets acquired

$

2,295

The fair value of RTIE exceeded the underlying fair value of all net assets acquired, giving rise to the goodwill. The
resulting goodwill will be deductible for tax purposes.

Revenues and net income of RTIE for the nine months ended August 31, 2013 were approximately
$1,728 and $292, respectively. Revenues and net income of RTIE for the period from March 19, 2012 to November 30, 2012 were approximately $2,088 and $568, respectively.

Fixed assets acquired in this transaction consist entirely of machinery and equipment.

On November 29, 2011, the Company entered into the CMT Asset Purchase Agreement with CMT and Randall S. Wilson with respect to certain sections, as a
shareholder of CMT, pursuant to which the Company purchased substantially all of the assets of CMT. CMT designs and manufactures Radio Frequency and Microwave Filters, Multiplexers, and related products for use in space and commercial applications.
The acquisition expands the Companys RF and Microwave capabilities and the Company believes that its low-cost manufacturing capability and established sales channels will provide additional revenue opportunities and improved profitability for
CMT products. These factors contributed to a purchase price resulting in the recognition of goodwill.

The Company also assumed certain liabilities of CMT
relating to the assets acquired. The Company purchased the assets of CMT for $8,200, subject to certain adjustments; as a result the Company put $700 of the $8,200 purchase price into escrow for a period of twelve months to secure the
indemnification obligations of CMT and Randall S. Wilson. During the quarter ended February 28, 2013, due to certain adjustments, the Company made a final purchase price payment of $600 and recorded Other income of $100.

The Company has accounted for the acquisition using the purchase method of accounting in accordance with the guidance on business combinations. The Company
also incurred legal costs, reorganization charges and professional fees in connection with the acquisition of approximately $102 as of November 30, 2011, and an additional $79 as of November 30, 2012. These expenses have been accounted for
during the respective periods as operating expenses. The results of operations of CMT have been included in the Companys results of operations beginning on December 1, 2011.

Accounting guidance requires that identifiable assets acquired and liabilities assumed be reported at fair value as of the acquisition date of a business
combination. Assets and liabilities acquired were as follows:

(in thousands)

Accounts receivable and other current assets

$

2,007

Inventory

941

Fixed assets

371

Goodwill

1,893

Intangible assets

4,545

Current liabilities

(545

)

Deferred revenue

(1,012

)

Fair value of net assets acquired

$

8,200

The fair value of CMT exceeded the underlying fair value of all net assets acquired, giving rise to the goodwill. The
resulting goodwill will be deductible for tax purposes.

Revenues and net income of CMT for the nine months ended August 31, 2013 were approximately
$4,613 and $133, respectively. Revenues and net income of CMT for the year ended November 30, 2012 were approximately $7,288 and $447, respectively.

Fixed assets acquired in this transaction consist entirely of machinery and equipment.

The following unaudited pro forma summary presents the combined results of operations as if the C-MAC and RTIE acquisitions described above had occurred at
the beginning of the nine month periods ended August 31, 2012.

(in thousands)Nine monthsendedAugust 31,2012

Revenues

$

200,926

Loss from continuing operations

$

(136,105

)

Net loss

$

(136,649

)

Loss from continuing operations per share  basic and diluted

$

2.46

Net loss per share  basic and diluted

$

2.47

5. DISCONTINUED OPERATIONS

a) Databus

On July 5, 2013, the
Company entered into the APA with Parent and the Purchaser, pursuant to which the Company sold to the Purchaser certain assets comprising the Companys Databus business in the U.S. and the U.K., including substantially all of the assets of the
Companys wholly owned subsidiary, National Hybrid, Inc., a New York corporation. The Purchaser paid the Company approximately $32,150 in cash for the assets, after certain adjustments based on closing inventory values as set forth in the APA
and customary indemnification provisions.

Other income in the three and nine months ended August 31, 2013 primarily relates to the gain on sale of Databus, net of
approximately $705 transaction expenses and deferred revenue of $2,544 attributable to a transition services agreement, whereby the Company will manufacture products in the United States for a period of up to 12 months and manufacture certain
products in the United Kingdom for a period of up to 4 years. The Company has determined that the U.K. transition services agreement does not result in the Company having a significant continuing involvement on these discontinued operations
following the assessment period.

The assets relating to Databus consisted of the following:

August 31,2013

November 30,2012

Cash and cash equivalents

$



$



Inventories



4,032

Current assets of discontinued operations

$



$

4,032

Fixed assets, net

$



$

242

Goodwill



14,802

Long-lived assets of discontinued operations

$



$

15,044

b) Sensors

On
April 17, 2013 the Company sold all of the issued and outstanding shares of capital stock or other equity interests of the Sensors companies for gross cash proceeds of approximately $51,350. Of this amount, $1,500 was placed into an escrow
account for 12 months to secure any indemnification claims made by the purchaser against the sellers, API and Spectrum.

Other income in the nine months ended August 31, 2013 primarily relates to the gain on sale of Sensors, net
of approximately $2,131 transaction expenses and deferred revenue of $1,780 attributable to a transition services agreement, whereby the Company will manufacture products for a period of up to 9 months and provide certain administrative services to
the Purchaser over a period of up to 18 months. The Company has determined that the transition services agreement does not result in the Company having a significant continuing involvement on these discontinued operations following the assessment
period. Other expenses for the three and nine months ended August 31, 2012 primarily relates to the goodwill impairment charge recorded in the SSC segment attributable to Sensors.

The assets and liabilities relating to Sensors consisted of the following:

August 31,2013

November 30,2012

Cash and cash equivalents

$



$

(15

)

Accounts Receivable



3,605

Inventories



6,067

Prepaid expenses and other current assets



146

Current assets of discontinued operations

$



$

9,803

Fixed assets, net

$



$

1,475

Intangible assets, net



2,156

Goodwill



24,430

Long-lived assets of discontinued operations

$



$

28,061

Accounts payable and accrued expenses

$



$

1,888

Current liabilities of discontinued operations

$



$

1,888

6. FAIR VALUE MEASUREMENTS

The following table summarizes assets and liabilities, which have been accounted for at fair value, along with the basis for the
determination of fair value.

(in thousands)

August 31, 2013

November 30, 2012

2013Total

UnobservableMeasurementCriteria(Level 3)

Impairment

2012Total

UnobservableMeasurementCriteria (Level 3)

Impairment

Fixed assets held for sale

$

150

$

150

$



$

900

$

900

$

1,781

Derivative liabilities  Redeemable Preferred Stock (Note 12)

(267

)

(267

)



(267

)

(267

)



Total

$

(117

)

$

(117

)

$



$

633

$

633

$

1,781

The following is a summary of activity for the nine months ended August 31, 2013 and year ended November 30, 2012
for assets and liabilities measured at fair value based on unobservable measure criteria:

(in thousands)

Fixed Assets Heldfor Sale

Derivative Liabilities Preferred Stock

Balance, November 30, 2011

$

3,216

$



Less: Fixed assets sold

(535

)



Less: Impairment of fixed assets held for sale

(1,781

)



Add: Embedded features of convertible notes and preferred stock



(855

)

Less: Embedded features of convertible notes upon conversion to preferred stock

The fair value of the fixed assets held for sale was determined using a market approach by using prices and other
relevant information generated by market transactions involving comparable assets. The Series A Preferred Stock (Note 10) also contain an embedded feature for a default dividend rate. The Company determined the fair value of the derivative
liabilities related to the preferred stock by using the present value of probability weighted cash flow scenarios.

In connection with the acquisition of Spectrum, on June 1, 2011, API entered into a Credit Agreement with Morgan Stanley Senior
Funding, Inc. as lead arranger, sole book runner and administrative agent, and with other lenders from time to time parties thereto (see Note 11a). In addition to a secured term loan, the Credit Agreement provided for a $15,000 secured revolving
credit facility, with an option for the Company to request an increase in the revolving credit facility commitment of up to an aggregate of $5,000. This facility was undrawn as of November 30, 2012 and is no longer outstanding following the
repayment of the term debt on February 6, 2013 (see Note 11a).

The Company also has a credit facility in place for its U.K. subsidiaries for approximately $387 (250 GBP), which
renews in July 2014. This line of credit is tied to the prime rate in the United Kingdom and is secured by the subsidiaries assets. This facility was undrawn as of August 31, 2013 and November 30, 2012.

On February 6, 2013, the Company refinanced its credit facilities and entered into (i) a credit agreement with various lenders and Guggenheim Corporate Funding, LLC (the Term Loan Agreement) that
provides for a $165.0 million term loan facility; and (ii) a credit agreement with various lenders and Wells Fargo Bank, National Association (the Revolving Loan Agreement) that provides for a $50.0 million asset-based revolving
borrowing base credit facility, with a $10.0 million subfacility (or the Sterling equivalent) for certain of our United Kingdom subsidiaries, a $10.0 million subfacility for letters of credit and a $5.0 million subfacility for swingline loans.

On February 6, 2013, in connection with entering into the Term Loan Agreement and the Revolving Loan Agreement, the
Amended and Restated Credit Agreement, dated as of June 27, 2011 and amended on January 6, 2012 and March 22, 2012, by and among the lenders from time to time party thereto and Morgan Stanley Senior Funding, Inc., as administrative
agent, lead arranger and sole book-runner, which had an outstanding balance of $183.4 million was paid off and terminated, which resulted in the write-off of approximately $10.3 million of deferred financing costs and note discounts. As of
February 6, 2013, the Company borrowed $165.0 million under the Term Loan Agreement and approximately $29.4 million under the Revolving Loan Agreement.

On July 5, 2013 and April 17, 2013, the Company sold Databus and Sensors (Note 5) and repaid approximately $28,780 and $44,919,
respectively, of its term loans from the proceeds of these sales, in accordance with the Term Loan Agreement. In addition, the Company repaid a portion of its term loans using the net proceeds of $739 from the March 14, 2013, sale of certain
land and a building in Palm Bay, Florida.

As of August 31, 2013, $87.9 million was outstanding under the Term Loan Agreement,
approximately $27.8 million was outstanding under the Revolving Loan Agreement, and $11.8 million was available for future borrowings under the Revolving Loan Agreement.

On May 22, 2013, the Company entered into a First Amendment to the Revolving Loan Agreement that amends certain cash management and
reporting requirements.

Term Loan Agreement

The term loans incurred pursuant to the Term Loan Agreement bear interest, at the Companys option, at the base rate plus 8.75% or an
adjusted LIBOR rate (based on one, two or three-month interest periods) plus 9.75% for the first year and at the base rate plus 9.75% or an adjusted LIBOR rate (based on one, two or three-month interest periods) plus 10.75% thereafter, with a LIBOR
floor of 1.25%. For purposes of the Term Loan Agreement, the base rate means the highest of Wells Fargo Bank, National Associations prime rate, the federal funds rate plus a margin equal to 0.50% and the adjusted LIBOR rate for a
3-month interest period plus a margin equal to 1.00%.

Interest is due and payable in arrears monthly for term loans bearing interest at
the base rate and at the end of an interest period (or at each three month interval in the case of term loans with interest periods greater than three months) in the case of term loans bearing interest at the adjusted LIBOR rate. Principal payments
of the term loans are paid at the end of each of the Companys fiscal quarters, commencing for the fiscal quarter ending May 31, 2013, with the balance of any outstanding term loans due and payable in full on February 6, 2018. The
quarterly principal payments will amortize at 1.25% for the fiscal quarters through the end of the Companys 2014 fiscal year, at 1.875% for the fiscal quarters through the end of the Companys 2015 fiscal year and at 2.50% for each of the
fiscal quarters thereafter.

Under certain circumstances, we are required to prepay the term loans upon the receipt of cash proceeds of
certain asset sales, cash proceeds of certain extraordinary receipts and cash proceeds of certain debt or equity financings, and based on a calculation of annual excess cash flow. Mandatory prepayments resulting from assets sales or certain debt
financings may require the payment of certain prepayment premiums.

The term loans are secured by a second priority security interest in
accounts receivable, inventory, machinery, equipment and certain other personal property relating to the foregoing, and any proceeds from any of the foregoing, subject to certain exceptions and liens, and a first priority security position on
substantially all other real and personal property, in each case that are owned by the Company and the subsidiary guarantors.

The Term
Loan Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries ability to, among other things, incur indebtedness, grant liens, dispose of assets and pay
dividends or make distributions to stockholders, in each case subject to customary exceptions for a term loan of this size and type.

Pursuant to the Term Loan Agreement, the Company is required to maintain compliance with an interest coverage ratio and a leverage ratio and to
limit its annual capital expenditures to $4.0 million per fiscal year (subject to carry-over rights).

Revolving Loan Agreement

The revolving loans incurred pursuant to the Revolving Loan Agreement bear interest, at the Companys option, at the base rate plus a
margin between 1.50% and 2.00% or an adjusted LIBOR rate (based on one, two, three or six-month interest periods) plus a margin between 2.50% and 3.00%, in each case with such margin being determined based on the Companys average daily excess
availability under the revolving credit facility for the preceding fiscal quarter. For purposes of the Revolving Loan Agreement, the base rate means the highest of Wells Fargo Bank, National Associations prime rate, the federal
funds rate plus a margin equal to 0.50% and the adjusted LIBOR rate for a 3-month interest period plus a margin equal to 1.00%.

Interest
is due and payable in arrears monthly for revolving loans bearing interest at the base rate and at the end of an interest period (or at each three month interval in the case of loans with interest periods greater than three months) in the case of
revolving loans bearing interest at the adjusted LIBOR rate. Principal, together with all accrued and unpaid interest, is due and payable on February 6, 2018. The Company may prepay the revolving loans and terminate the commitments, in whole or
in part, at any time without premium or penalty. Under certain circumstances, we are required to prepay the revolving loans upon the receipt of cash proceeds of certain asset sales.

All borrowings under the Revolving Loan Agreement are limited by amounts available pursuant to a borrowing base calculation, which is based on
percentages of eligible accounts receivable, inventory, machinery and equipment, in each case subject to reductions for applicable reserves.

The Revolving Loan Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and
its subsidiaries ability to, among other things, incur indebtedness, grant liens, dispose of assets and pay dividends or make distributions to stockholders, in each case subject to customary exceptions for a credit facility of this size and
type.

Pursuant to the Revolving Loan Agreement, the Company is also required to maintain compliance
with a fixed charge coverage ratio and to limit its annual capital expenditures to $4.0 million per fiscal year (subject to carry-over rights) at such times that it fails to maintain excess availability under the revolving credit facility above a
specified level.

b)

A subsidiary of the Company in the United Kingdom entered into a 20 year term mortgage agreement in 2007, under which interest is charged at a margin of 1.35% over Barclays Fixed Base Rate of 0.5% at August 31,
2013. The mortgage is secured by the subsidiarys assets.

c)

A subsidiary of the Company in the United Kingdom entered into a 5 year term loan facility with Lockman Electronic Holdings Limited on December 16, 2011 (Lockman Loan), under which interest is charged
at a margin of 5.5% over LIBOR. The margin was to increase by 0.5% each year on December 1 for the term of the agreement. The term loan was secured against a debenture over the subsidiarys assets. This loan was repaid on February 6,
2013.

d)

On March 19, 2012 the Company completed the acquisition of substantially all of the assets of RTIE (Note 4b) for a total purchase price of $2,295, with $1,500 payable in cash at closing and the remainder
pursuant to a $795 Promissory Note payable in 24 equal monthly installments. The aggregate principal amount of the Promissory Note payable outstanding was $242 as of August 31, 2013.

12. REDEEMABLE PREFERRED STOCK

On March 22, 2012, following the acquisition of C-MAC, the Company entered into a Note Purchase Agreement by and among the Company and
the purchaser referred to therein (the Note Purchase Agreement). Pursuant to the Note Purchase Agreement, the Company sold an aggregate initial principal amount of $26,000 of convertible subordinated notes (the Note) to a
single purchaser in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. The Company received aggregate gross proceeds of $16,000 from the private placement, all of which will be used for working
capital purposes. The purchaser of the Note was an affiliate of Senator Investment Group LP. At the time of the issuance of the Note, the purchaser of the Note was the beneficial owner of approximately 10.7% of our outstanding common stock, without
giving effect to the transactions contemplated by the Note Purchase Agreement.

Upon the filing of the amendment to the Charter and the Certificate of
Designation (as described and defined below), the Note converted into 26,000 shares of Series A Mandatorily Redeemable Preferred Stock of API (Series A Preferred Stock). The holder has the option to convert all or any portion of the
amount of the liquidation preference (Liquidation Preference) (initially $1,000 per share and $1,027 per share as of August 31, 2013) of the Series A Preferred Stock plus the amount of unpaid and accrued dividends into common stock
of API at $6.00 per share. The outstanding Series A Preferred Stock, as of August 31, 2013, is convertible into approximately 4,451,189 shares of common stock.

On March 22, 2012, certain stockholders of the Company took action by written consent (the Written Consent), as permitted pursuant to the
Companys bylaws and Amended and Restated Certificate of Incorporation, as amended (the Charter), to amend the Charter to (i) increase the number of shares of common stock, par value $0.001 per share, issuable by the Company to
250,000,000 shares from 100,000,000 shares; and (ii) authorize the issuance by the Companys Board of Directors, from time to time, of up to 10,000,000 shares of preferred stock, par value $0.001 per share (the Preferred
Stock), in one or more series. The Written Consent also approved the issuance of shares of API common stock in connection with the conversion of the Note and Series A Preferred Stock as contemplated by the Note Purchase Agreement for all
purposes, including pursuant to the rules and regulations of The NASDAQ Stock Market.

On March 22, 2012, subject to the effectiveness of the
amendments to the Charter described above, the Companys Board of Directors also authorized the creation of a class of Preferred Stock designated as Series A Mandatorily Redeemable Preferred Stock pursuant to a Certificate of
Designation (the Certificate of Designation).

The Company received aggregate gross proceeds of $16,000 from the issuance of the Note. The
Company recorded a debt discount of $10,000 representing the difference between the principal amount of the Note and the proceeds received. The Note contained embedded features for a default interest rate and make whole provisions. Accordingly, the
Company evaluated these embedded features and recorded an additional debt discount in the amount of $588. The Company also recorded $2,272 of additional discount resulting from the beneficial conversion feature of the Notes. The total debt discount
was amortized over the contracted life of the Notes using the effective interest method. Up to the date of conversion this resulted in interest expense of $218.

On May 16, 2012, the Company filed the amendments to the Charter and the Certificate of Designation with the Secretary of State of the State of Delaware,
at which time they became effective. Pursuant to the Certificate of Designation, the Company is authorized to issue 1,000,000 shares of Series A Preferred Stock. As described above, the Note converted into 26,000 shares of Series A Preferred Stock.

Upon conversion of the Note, the remaining unamortized discount of $12,644 was recorded as interest expense and the $26,000 face value of the Note was
recorded as Series A Preferred Stock.

The Series A Preferred Stock will rank, with respect to dividend rights, redemption rights and rights upon
liquidation, dissolution or wind-up (i) senior to the common stock and each other class of capital stock or series of Preferred Stock established by the Board of Directors, the terms of which expressly provide that such class or series ranks
junior to the Series A Preferred Stock; (ii) junior to all capital stock or series of Preferred Stock established by the Board, the terms of which expressly provide that such class or series will rank senior to the Series A Preferred Stock; and
(iii) on parity with all other classes of capital stock or series of Preferred Stock established by the Board of Directors, the terms of which expressly provide that such class or series will rank on parity with the Series A Preferred Stock.

The holders of Series A Preferred Stock will be entitled to vote on all matters voted on by holders of the common stock, voting together as a single
class with the other shares entitled to vote. The holders of Series A Preferred Stock will have the right to cast the number of votes equal to the total number of votes which could be cast in such vote by a holder of the number of shares of common
stock into which the shares of Series A Preferred Stock could be converted.

Commencing on March 22, 2013, holders of Series A Preferred Stock are
entitled to receive cumulative dividends on the Liquidation Preference, computed on the basis of a 360-day year of twelve 30-day months at a rate equal to 6% per annum, compounded quarterly on the last day of each March, June, September and
December. Accrued and unpaid dividends also will be paid on the date of any redemption or on any liquidation, dissolution or winding-up of the Company. Dividends will be paid in kind each quarter, by adding the amount of the accrued and unpaid
dividend to the Liquidation Preference amount of each share of Series A Preferred Stock (the Accreted Dividend Amount). The Accreted Dividend Amount will constitute part of the Liquidation Preference of each share of Series A Preferred
Stock as of each applicable quarterly dividend payment date and dividends will begin to accrue on each Accreted Dividend Amount beginning on the date on which such amount is added to the Liquidation Preference amount of each share of Series A
Preferred Stock. However, all dividends due and payable on the date that the Liquidation Preference of a share of Series A Preferred Stock becomes due and payable will be payable in cash on such date. Upon an Early Redemption Event, dividends shall
accrue while such event is continuing at the rate equal to the rate for the most recently issued actively traded ten year U.S. Treasury security, plus 10.0%. An Early Redemption Event means if (a) the Company (i) defaults in
its obligation to pay the amounts in connection with a redemption of the Series A Preferred Stock and such default continues unremedied for three business days; (ii) breaches in material respect any of its representations or warranties
contained in the Note Purchase Agreement, the Note or other document delivered in connection therewith; (iii) breaches certain covenants under the Note Purchase Agreement or other document delivered in connection therewith (subject to
applicable grace periods); (iv) defaults (A) in any payment of any indebtedness in excess of $5,500 or (B) defaults in the observance of any condition or agreement in respect of any such indebtedness, and as a consequence of such
default, such indebtedness becomes due and payable prior to its stated maturity; (v) commences certain bankruptcy or similar proceedings or has a bankruptcy or similar proceeding commenced against it that is not dismissed within the applicable
grace period; or (b) a material provision of the Note Purchase Agreement, the Note or other agreement delivered in connection therewith ceases to be effective.

The Series A Preferred Stock will be convertible at any time at the discretion of the holders into that number of shares of common stock equal to the
Liquidation Preference being converted (plus any accrued dividends that have not yet been accreted to the Liquidation Preference), divided by the initial conversion price of $6.00 per share, which initial conversion price is subject to adjustments
as described below. In addition, upon a Change of Control (as defined in the Note Purchase Agreement), the sale of all or substantially all of the assets of the Company or the occurrence of certain dilution events (a Mandatory Redemption
Event), then the holders of Series A Preferred Stock will have the right to receive upon conversion, in lieu of the common stock otherwise issuable, such shares of stock, securities or other property as would have been issued or payable upon
such Mandatory Redemption Event had the shares of Series A Preferred Stock been converted into common stock immediately prior to such Mandatory Redemption Event.

On March 22, 2019, all of the outstanding shares of Series A Preferred Stock are to be redeemed by the Company for the amount of the Liquidation
Preference, plus any and all amounts owing to the holder of such redeemed shares pursuant to the terms of the Note Purchase Agreement, the Note or any other document delivered in connection therewith. The Company must offer to redeem all of the
shares of Series A Preferred Stock upon a Mandatory Redemption Event. A holder of Series A Mandatorily Redeemable Preferred Stock may accept or reject such offer of redemption.

13. SHAREHOLDERS EQUITY

On June 27, 2011, API entered into a Common Stock Purchase Agreement, by and among API and the purchasers (as defined therein),
pursuant to which API issued 4,791,958 shares of its common stock in a private placement for a purchase price of $6.50 per share. API received aggregate gross proceeds of approximately $31,148 from the private placement. In connection with the
private placement, API also issued 300,000 shares of common stock to certain purchasers in consideration for a backstop commitment provided by such purchasers.

On March 18, 2011, the Company entered into a Common Stock Purchase Agreement, by and among the Company and the Purchasers (as defined therein), pursuant
to which the Company issued 17,095,102 shares of its common stock in a private placement for a purchase price of $6.00 per share.

On March 28, 2011, the Company issued to an officer of the Company as part of his appointment as President
and Chief Operating Officer, 300,000 shares of APIs common stock of which 140,019 of these shares were reacquired through the withholding of shares to pay employee tax obligations upon the issuance of the shares.

On January 31, 2011, the Company issued 1,216,667 shares of its common stock to the holders of the $3,650 of convertible notes for a price equal to $3.00
per share upon conversion of the convertible notes.

On January 21, 2011, API acquired all of the equity of SenDEC, which included SenDECs
electronics manufacturing operations and approximately $30,000 of cash, in exchange for the issuance of 22,000,000 API common shares to Vintage.

On
December 28, 2010, the Company filed a Certificate of Amendment of Amended and Restated Certificate of Incorporation, which effected a one-for-four reverse share split of the Companys outstanding common shares. A one-for-four reverse
share split was also effected for the exchangeable shares. All the references to number of shares, options and warrants presented in these financial statements have been adjusted to reflect the post split number of shares.

On January 20, 2010 the Company agreed to issue 800,000 shares of API common stock payable as part of the compensation to the KGC Companies or their
designees. 250,000 shares were issued and delivered at closing, 250,000 shares were to be issued and delivered on the first anniversary of the closing and 300,000 shares were to be issued and delivered on the second anniversary of the closing. The
Company has issued 126,250 shares into escrow from the 550,000 shares remaining to be delivered. The API Pennsylvania Subsidiaries have claimed a right of set off against the escrowed shares under the asset purchase agreement with respect to claimed
amounts due to the Company under the indemnification provisions of the asset purchase agreement. The unissued shares have been accounted for as common shares subscribed but not issued. In addition, on January 20, 2010 and January 22, 2010,
the Company issued warrants to purchase an aggregate of 892,862 shares of common stock with an exercise price of $5.60 per share, which expire on January 20, 2015 and January 22, 2015.

In connection with the Plan of Arrangement that occurred on November 6, 2006, the Company was obligated to issue 2,354,505 shares of either API common
stock or exchangeable shares of API Nanotronics Sub, Inc. in exchange for the API Electronics Group Corp. common shares previously outstanding. As of August 31, 2013, API is obligated to issue a remaining approximately 580,553 shares of its
common stock under the Plan of Arrangement either directly for API common shares or in exchange for API Nanotronics Sub, Inc. exchangeable shares not held by API or its affiliates. There are 539,284 exchangeable shares outstanding (excluding
exchangeable shares held by the Company). Exchangeable shares are substantially equivalent to our common shares.

The Company issued 15,000 and 1,340,477
options and RSUs during nine months ended August 31, 2013 and the year ended November 30, 2012, respectively (Note 14). These option grants were valued using the Black-Scholes option-pricing model.

14. SHARE-BASED COMPENSATION

On October 26, 2006, the Company adopted its 2006 Equity Incentive Plan (the Equity Incentive Plan), which was approved at
the 2007 Annual Meeting of Stockholders of the Company. All the prior options issued by API were carried over to this plan under the provisions of the Plan of Arrangement. On October 22, 2009, the Company amended the Equity Incentive Plan to
increase the number of shares of common stock under the plan from 1,250,000 to 2,125,000. On January 21, 2011, the Company amended the Equity Incentive Plan to further increase the number of shares of common stock under the plan from 2,125,000
to 5,875,000, and on June 3, 2011 amended the plan to permit the issuance of RSUs, which amendments were approved by the shareholders of the Company on November 4, 2011. Of the 5,875,000 shares authorized under the Equity Incentive Plan,
3,178,127 shares are available for issuance pursuant to options, RSUs, or stock as of August 31, 2013. Under the Companys Equity Incentive Plan, incentive options and non-statutory options may have a term of up to ten years from the date
of grant. The stock option exercise prices are equal to at least 100 percent of the fair market value of the underlying shares on the date the options are granted.

As of August 31, 2013, there was $665 of total unrecognized compensation related to non-vested stock options, which are not contingent upon attainment of
certain milestones. For options with certain milestones necessary for vesting, the fair value is not calculated until the conditions become probable. The cost is expected to be recognized over the remaining periods of the options, which are expected
to vest from 2013 to 2016.

During the nine months ended August 31, 2013 and August 31, 2012, $791 and $1,934, respectively, has been recognized
as share-based compensation expense in cost of revenues, general and administrative expense, selling expense, and research and development expense.

The intrinsic value is calculated as the excess of the market value as of August 31, 2013 over the exercise price of the
shares. The market value as of August 31, 2013 was $2.74 as reported by the NASDAQ Stock Market.

The following table sets forth the computation of weighted-average shares outstanding for calculating basic and diluted earnings per share
(EPS):

Three months ended

Nine months ended

August 31,2013

August 31,2012

August 31,2013

August 31,2012

Weighted average shares-basic

55,424,157

55,365,978

55,398,833

55,296,470

Effect of dilutive securities

*

*

*

*

Weighted average sharesdiluted

55,424,157

55,365,978

55,398,833

55,296,470

Basic EPS and diluted EPS for the three months and nine months ended August 31, 2013 and August 31, 2012 have been
computed by dividing the net income (loss) by the weighted average shares outstanding. The weighted average numbers of shares of common stock outstanding includes exchangeable shares and shares to be issued under the Plan of Arrangement.

*

Outstanding options and RSUs aggregating 1,972,488 incremental shares, and 892,862 warrants have been excluded from the three and nine months ended August 31, 2013 computation of diluted EPS as none are exercisable
and in-the-money. Outstanding options and RSUs aggregating 2,843,765 incremental shares, and 955,362 warrants have been excluded from the three and nine months ended August 31, 2012 computations of diluted EPS as they are anti-dilutive due to
the losses generated in each respective period.

17. COMMITMENTS AND CONTINGENCIES

a)

On September 15, 2011, Currency, Inc., KII Inc., Kuchera Industries, LLC, William Kuchera and Ronald Kuchera (the Plaintiffs) filed a lawsuit against API and the API Pennsylvania Subsidiaries in the
Court of Chancery of the State of Delaware in relation to the Asset Purchase Agreement by and among API, the API Pennsylvania Subsidiaries, the KGC Companies, William Kuchera, and Ronald Kuchera dated January 20, 2010. Plaintiffs
complaint alleges claims for breach of contract and unjust enrichment based on their contention that API and the API Pennsylvania Subsidiaries violated the Agreement by failing to issue certain shares of stock to Plaintiffs and by failing to
cooperate with Plaintiffs in the filing of a final general and administrative overhead rate with the Defense Contracting Audit Agency. API and the API Pennsylvania Subsidiaries filed an answer to the complaint denying all liability and a
counterclaim for breach of contract against Plaintiffs. The final outcome and impact of this matter is subject to many variables, and cannot be predicted. Of the 550,000 shares that have not been delivered under the Asset Purchase Agreement, 126,250
were placed in escrow and the remaining 423,750 shares have been accounted for as common shares subscribed but not issued with a value of $2,373.

b)

The Aster Group filed a lawsuit on November 24, 2010 against Spectrum, in Worcester Superior Court. The lawsuit arose out of a lease between Aster as landlord and Spectrum as tenant for a commercial property
located at 165 Cedar Hill Street in Marlborough Massachusetts (the Property). This claim was settled on March 19, 2013.

c)

The Company did not file its July 31, 2011 U.S. tax return timely and filed a Private Letter Ruling to request the IRS to grant relief to allow the Company to file a consolidated U.S. tax return for its tax year
ended July 31, 2011. A favorable ruling from the IRS was received during the fiscal quarter ended May 31, 2013, which allows the Company to file consolidated U.S. tax returns.

d)

The Company is also a party to lawsuits in the normal course of its business. Litigation can be unforeseeable, expensive, lengthy and disruptive to normal business operations. Moreover, the results of complex legal
proceedings are difficult to predict. An unfavorable resolution of a particular lawsuit could have a material adverse effect on the Companys business, operating results, or financial condition.

In accordance with required guidance, the Company accrues for litigation matters when losses become probable and
reasonably estimable. The Company has recorded an accrual of approximately $49 relating to its outstanding legal matters as of August 31, 2013 (November 30, 2012$1,076). As of the end of each applicable reporting period, or more
frequently, as necessary, the Company reviews each outstanding matter and, where it is probable that a liability has been incurred, it accrues for all probable and reasonably estimable losses. Where the Company is able to reasonably estimate a range
of losses with respect to such a matter, it records an accrual for the amount within the range that constitutes its best estimate. If the Company can reasonably estimate a range but no amount within the range appears to be a better estimate than any
other, it will use the amount that is the low end of such range. Because of the uncertainty, the complexity and the many variables involved in litigation, the actual costs to the Company with respect to its legal matters may differ from our
estimates, could result in a significant difference and could have a material adverse effect on the Companys financial position, liquidity, or results of operations. If we determine that an additional loss in excess of our accrual is probable
but not estimable, the Company will provide disclosure to that effect. The Company expenses legal costs as they are incurred.

18. INCOME TAXES

For the three and nine month periods ended August 31, 2013 , the Companys effective income tax rates from continuing operations
were 212.2% and 15.5%, respectively, and 2.2% and 3.5% for the three and nine month periods ended August 31, 2012, respectively, compared to an applicable U.S. federal statutory income tax rate of 34%. The difference between the effective tax
rate and U.S. statutory tax as of August 31, 2013 is primarily due to the existence of valuation allowances for deferred tax assets including net operating losses, the accrual of non-cash tax expense due to additional valuation allowances in
connection with the tax amortization of our indefinite-lived intangible assets that was not available to offset existing deferred tax assets, the federal and state benefit of current losses from continuing operations, and the income from foreign
subsidiaries taxed at rates lower than the U.S. statutory rate. For the nine months ended August 31, 2013, the Company recorded valuation allowances on deferred tax assets relating to current year losses. The difference between the effective
tax rate and U.S. statutory tax as of August 31, 2012 is primarily due to the release of reserves on uncertain tax positions and adjustments for previously recorded accruals.

As of August 31, 2013, the Company has no significant unrecognized tax benefits.

The Companys practice is to recognize interest and penalties related to income tax matters as income tax expense. For each of the periods presented
herein, there were no significant amounts accrued or charged to expense for tax-related interest and penalties.

The Company is subject to possible income
tax examinations for its U.S. federal and state income tax returns filed for the tax years 2008 to present. International tax statutes may vary widely regarding the tax years subject to examination, but generally range from 2008 to the present. The
Company did not file its July 31, 2011 U.S. tax return timely and filed a Private Letter Ruling to request the IRS to grant relief to allow the Company to file a consolidated U.S. tax return for the tax year ended July 31, 2011. During the
second fiscal quarter of 2013, the Company received a favorable ruling, granting the Companys request allowing it to continue to file its U.S. tax return as a consolidated group. No liability had been recognized for this potential
deconsolidation pending the final ruling by the IRS as the Company believed that it was more likely than not that the relief would be granted by the IRS. The Company promptly filed its tax return subsequent to receipt of the ruling.

19. RESTRUCTURING CHARGES RELATED TO CONSOLIDATION OF OPERATIONS

In accordance with accounting guidance for costs associated with asset exit or disposal activities, restructuring costs are recorded as
incurred. Restructuring charges for employee workforce reductions are recorded upon employee notification.

In May 2012, the Company announced the
restructuring of its EMS business (EMS restructuring) in order to improve its profitability. The actions taken as part of the EMS restructuring are intended to realize synergies from our combined EMS operations, contain costs, reduce our
exposure to low margin and unprofitable revenue streams within the EMS businesses, and streamline our operations. Elements of the EMS restructuring include management re-alignment, workforce reductions and write-downs and charges related to
inventory, fixed assets, and long-term leases. The EMS restructuring was substantially completed by the end of fiscal 2012. As of November 30, 2012, the Company reduced its EMS workforce by approximately 10%, which represented approximately 2%
of its global workforce.

During the period ending November 30, 2012, the Company incurred approximately $591 related to cash outlays, primarily due
to employee separation expense. The majority of the non-cash charges are primarily related to the write-down of inventory related to the EMS product offerings, leasehold impairments and fixed asset impairments.

The following tables summarize the charges related to EMS restructuring activities by type of cost:

EMSRestructuring(in thousands)

Salary and related charges

$

591

Inventory write-down

7,401

Fixed asset impairment

865

Lease impairment

3,672

Accumulated restructuring charges at November 30, 2012

12,529

EMSRestructuring(in thousands)

Cash payments

(591

)

Non-cash charges

(8,628

)

Balance  Lease impairment accrual, November 30, 2012

$

3,310

Balance  Lease impairment accrual, August 31, 2013

$

3,021

During the three months ended August 31, 2013, the Company incurred additional non-EMS restructuring charges of $136
primarily related to severance and legal costs.

20. SEGMENT INFORMATION

The Company follows the authoritative guidance on the required disclosures for segments which establish standards for the way that public
business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in financial reports. The guidance also establishes standards
for related disclosures about products and services, geographic areas and major customers.

The authoritative accounting guidance uses a management
approach for determining segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Companys reportable segments. Previously,
the Company reported our segment information in two segments: Systems & Subsystems and Secure Systems & Information Assurance. To better highlight to investors its profitability and product offerings, beginning with the third
quarter of fiscal 2012, the Company redefined its reportable operating segments based on the way in which the Chief Operating Decision Maker manages and evaluates the business. For this reason and consistent with authoritative guidance, the Company
concluded that the EMS business should be reported as a separate segment, as this more closely aligns with its management organization and strategic direction. The Company also renamed the Systems & Subsystems segment to Systems,
Subsystems & Components to more accurately describe the product offering of this segment. There were no changes to the Secure Systems & Information Assurance segment. The Companys operations are conducted in three principal
business segments: Systems, Subsystems & Components (SSC), Secure Systems & Information Assurance (SSIA) and Electronic Manufacturing Services (EMS). The presentation of prior periods has been revised to conform to the new
segments. Inter-segment sales are presented at their market value for disclosure purposes.

The Company has evaluated subsequent events through October 9, 2013, the date the financial statements were issued, and up to the time
of filing of the financial statements with the Securities and Exchange Commission.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

This section is provided as
a supplement to, and should be read in conjunction with, our unaudited Consolidated Financial Statements and accompanying Notes thereto included in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended
November 30, 2012 to help provide an understanding of our financial condition, changes in financial condition and results of our operations.

Prior to the third quarter of fiscal 2012, we reported in two business segments: Systems & Subsystems and Secure Systems &
Informational Assurance. To better highlight to our investors our profitability and product offerings, beginning with the quarter ended August 31, 2012, we redefined our reportable operating segments, based on the way in which the Chief
Operating Decision Maker manages and evaluates the business. For this reason and consistent with authoritative guidance, we concluded that the Electronic Manufacturing Services business (formerly part of the Systems & Subsystems segment)
should be reported as a separate segment (EMS), as this more closely aligns with our management organization and strategic direction. We also renamed the Systems & Subsystems segment to Systems, Subsystems & Components (SSC) to
more accurately describe the product offering of this segment. There were no changes to the Secure Systems & Information Assurance (SSIA) segment. Prior periods have been revised to conform with the new segments: SSC, EMS and SSIA.

As discussed below, we sold Databus and Sensors. The results of Databus and Sensors are presented as discontinued operations for all periods
presented.

Business Overview of API Technologies Corp.

General

We design, develop and
manufacture electronic systems, subsystems, RF/Microwave, Power, and secure solutions for technically demanding defense, aerospace and commercial applications. We own and operate several state-of-the-art manufacturing facilities in the United
States, the United Kingdom, Canada, China and Mexico. Our defense customers, which include military prime contractors, and the contract manufacturers who work for them, in the United States, Canada, the United Kingdom and various other countries in
the world, outsource many of their defense electronic components and systems to us as a result of the combination of our design, development and manufacturing expertise. Our commercial customers, who represent the commercial, aerospace, space,
industrial, and medical communities, leverage our products, engineering, and manufacturing capabilities to address high-reliability requirements.

Operating through our three segments, SSC, EMS, and SSIA, we are positioned as a total engineered solution provider to various world
governments, military, defense, aerospace and homeland security contractors, and leading industrial and commercial firms. With a focus on high-reliability products for critical applications, our solutions portfolio spans RF/microwave and
microelectronics, electromagnetics, power products, sensors, and security products. We also offer a wide range of electronic manufacturing services from prototyping to high volume production and secure communication products, including ruggedized
computers and peripherals, network security appliances, and TEMPEST Emanation prevention products.

On April 17, 2013 we sold all of
the issued and outstanding shares of capital stock or other equity interests of Spectrum Sensors and Controls, Inc., a Pennsylvania corporation (Sub 1), Spectrum Sensors and Controls, LLC, a California limited liability company
(Sub 2), and Spectrum Sensors and Controls, Inc., an Ohio corporation (Sub 3 and together with Sub 1 and Sub 2, Sensors), for gross cash proceeds of approximately $51.4 million. Of this amount, $1.5 million was
placed into an escrow account for 12 months to secure any indemnification claims made by the purchaser against the sellers, API and Spectrum Control, Inc (Spectrum)., a wholly owned subsidiary of API.

On February 6, 2013, we refinanced substantially all of our outstanding indebtedness. In connection with this refinancing, we entered
into (i) a credit agreement with various lenders and Guggenheim Corporate Funding, LLC (the Term Loan Agreement) that provides for a $165.0 million term loan facility; and (ii) a credit agreement with various lenders and Wells
Fargo Bank, National Association (the Revolving Loan Agreement) that provides for a $50.0 million asset-based revolving borrowing base credit facility, with a $10.0 million subfacility (or the Sterling equivalent) for certain of our
United Kingdom subsidiaries, a $10.0 million subfacility for letters of credit and a $5.0 million subfacility for swingline loans. On May 22, 2013, we entered into a First Amendment to the Revolving Credit Agreement, which amends certain cash
management and reporting requirements.

On March 22, 2012, we, through our subsidiary API Technologies (UK) Limited (API
UK), acquired the entire issued share capital of C-MAC Aerospace Limited (C-MAC) for a total purchase price of £21.0 million (approximately $33.0 million), including the assumption of C-MACs loan facility. C-MAC is
a leading provider of high-reliability electronic systems, modules, and components to the defense, aerospace, space, industrial and energy sectors. On May 31, 2012, C-MAC Aerospace Limited changed its name to RF2M Limited (RF2M UK).

After closing the purchase of C-MAC, we raised $16.0 million of capital in a private placement through the form of a $26.0 million
convertible subordinated note (the Note).

On March 22, 2012, our Board also approved an amendment to our Amended and Restated
Certificate of Incorporation (the Charter) to (i) increase the number of our shares of common stock from 100,000,000 to 250,000,000 shares, and (ii) authorize the issuance by the Companys Board of Directors of up to
10,000,000 shares of Preferred Stock, in one or more series. Our Board of Directors also authorized, subject to the effectiveness of such amendment to the Charter, the creation of a class of Preferred Stock designated as Series A Mandatorily
Redeemable Preferred Stock (which we also refer to as Series A Preferred Stock) pursuant to a Certificate of Designation. Pursuant to the Certificate of Designation, we are authorized to issue 1,000,000 shares of Series A Preferred Stock.
Shareholders owning a majority of our common stock on March 22, 2012 approved such actions by a written consent and on May 16, 2012, we filed the amendment to the Charter and filed the Certificate of Designation with the Secretary of State
of the State of Delaware, at which time they became effective. At such time, the Note, in accordance with its terms, converted into 26,000 shares of Series A Preferred Stock.

On March 19, 2012, we completed the acquisition of substantially all of the assets of RTI Electronics (RTIE) for a total
purchase price of approximately $2.3 million, with $1.5 million payable in cash at closing and the remainder pursuant to a Promissory Note of approximately $0.8 million payable in 24 equal monthly installments. Based in Anaheim, California, RTIE is
a leading manufacturer of passive electronic components, including thermistors, film capacitors, magnetic transformers and inductors, and audio power conditioning units. RTIE had revenues in the year ended December 31, 2011 of approximately
$5.3 million from a diverse Fortune 500 customer base spanning the audio, defense, aerospace, and industrial markets.

Since 2010, we have
implemented a number of cost reduction initiatives to rationalize the number of our facilities and personnel, which has resulted in us consolidating certain parts of our manufacturing operations. In May 2012 we initiated the restructuring of our EMS
operations, and during the nine months ended August 31, 2013 we continued to implement cost reductions. We expect to continue to rationalize our cost structure over the next several quarters.

Recent Developments

On
July 5, 2013, we entered into an asset purchase agreement (the APA) with ILC Industries, LLC (Parent) and Data Device Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (the
Purchaser) pursuant to which the Company sold to the Purchaser certain assets comprising our data bus business (Databus), including substantially all of the assets of our wholly owned subsidiary, National Hybrid, Inc., a New
York corporation. The Purchaser paid gross proceeds of approximately $32.2 million in cash for the assets, of which $28.8 million of the proceeds from such sale were used to repay certain of the Companys outstanding debt.

Operating Revenues

We derive operating
revenues from our three principal business segments: SSC; EMS; and SSIA. The acquisitions of C-MAC on March 22, 2012, Spectrum on June 1, 2011 and the asset acquisitions of RTIE on March 19, 2012 and CMT on November 29, 2011
significantly expanded our SSC segment revenues. The operations of SenDEC and the KGC Companies are now substantially reflected in our EMS segment (previously reported as part of the SSC segment). The asset acquisition of Cryptek on July 7,
2009 resulted in the creation of our SSIA segment. Our customers are located primarily in the United States, Canada and the United Kingdom, but we also sell products to customers located throughout the world.

Secure Systems & Information Assurance (SSIA) Revenue includes revenues derived from the manufacturing of TEMPEST and
Emanation products and services, ruggedized computers and peripherals, secure access and information assurance products. The principal market for these products are the government agencies of the United States, Canada and the United Kingdom and
other NATO and European Union countries, Fortune 500 companies and telecommunication service providers.

We conduct all of our design and manufacturing efforts in the United States, Canada, United Kingdom, Mexico and China. Cost of goods sold
primarily consists of costs that were incurred to design, manufacturer, test and ship the products. These costs include raw materials, including freight, direct labor, subcontractor services, tooling required to design and build the parts, and the
cost of testing (labor and equipment) the products throughout the manufacturing process and final testing before the parts are shipped to the customer. Other costs include provision for obsolete and slow moving inventory, and restructuring charges
related to the consolidation of operations.

Operating Expenses

Operating expenses consist of selling, general, administrative expenses, research and development, business acquisition and related charges and
other income or expenses.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses include compensation and benefit costs for all employees, including sales
and customer service, executive, finance and human resource personnel, as well as sales commissions. Also included in SG&A is compensation related to stock-based awards to employees and directors, professional services for accounting, legal and
tax, information technology, rent and general corporate expenditures.

Research and Development Expenses

Research and development (R&D) expenses represent the cost of our development efforts. R&D expenses include salaries of
engineers, technicians and related overhead expenses, and the cost of materials utilized in research. R&D costs are expensed as incurred.

Other expense (income) consists of interest expense on term loans, notes payable, operating loans and capital leases, interest income on cash
and cash equivalents and marketable securities, amortization of note discounts and deferred financing costs, gains or losses on disposal of property and equipment, and gains or losses on foreign currency transactions. Other income also includes
gains related to the sales of fixed assets held for sale and acquisition-related gains when net assets acquired exceed the purchase price of the business acquisition.

Backlog

Our sales backlog at
August 31, 2013 was approximately $135.8 million compared to approximately $139.0 million at November 30, 2012. Our backlog figures represent confirmed customer purchase orders that we had not shipped at the time the figures were
calculated. We lack control over the timing of new purchase orders, as such, the backlog can increase or decrease significantly based on timing of customer purchase orders.

(dollar amounts in thousands)

August 31,2013

November 30,2012

%Change

Backlog by segments (from continuing operations):

SSC

$

99,904

$

99,246

0.7

%

EMS

26,407

36,654

-27.9

%

SSIA

9,499

3,067

209.7

%

$

135,810

$

138,967

-2.3

%

The decrease at August 31, 2013 compared to November 30, 2012 was primarily related to our EMS
segment as a result of higher EMS revenues and lower bookings in the nine months ended August 31, 2013, following a high level of EMS bookings in the quarter ended November 30, 2012, partially offset by increased SSIA bookings in the
quarter ended August 31, 2013.

Results of Operations for the Three Months Ended August 31, 2013 and 2012

The following discussion of results of operations is a comparison of our three months ended August 31, 2013 and 2012.

Operating Revenue

(dollar amounts in thousands)Three months ended August 31

2013

2012

%Change

Revenues by segments (from continuing operations):

SSC

$

45,653

$

41,127

11.0

%

EMS

13,265

12,981

2.2

%

SSIA

3,712

4,651

(20.2

)%

$

62,630

$

58,759

6.6

%

We recorded a 6.6% increase in overall revenues for the three months ended August 31, 2013 over the same
period in 2012. The increase is mainly attributed to the increase in revenues in our SSC and EMS segments. The increase in our SSC segment revenues resulted primarily from higher revenues to the defense end market. During the three months ended
August 31, 2013, the decrease in the SSIA segment revenues results primarily from lower revenue generated by our operations in the U.K. and Canada as a result of the completion of one U.K. program with a new customer in the third fiscal quarter
of 2012, and in Canada from lower revenue from several existing customers.

Operating Expenses

Cost of Revenue and Gross Margin

Three monthsended August 31

2013

2012

Gross margin by segments (from continuing operations):

SSC

28.6

%

28.4

%

EMS

4.9

%

(2.7

)%

SSIA

34.6

%

33.3

%

Overall

23.9

%

21.9

%

Our combined gross margin for the three months ended August 31, 2013 increased by approximately 2.0
percentage points compared to the three months ended August 31, 2012. Gross margin varies from period to period and can be affected by a number of factors, including material costs, product mix, production efficiency, and restructuring
activities. Overall cost of revenues from continuing operations as a percentage of sales decreased in the three months ended August 31, 2013 from 78.1% to 76.1% compared to the same period last year. The SSC segment cost of revenues remained
consistent with the same period in 2012. The EMS segment cost of revenues for the three months ended August 31, 2013 decreased by 7.6 percentage points compared with the same period in 2012, primarily as a result of restructuring charges taken
in the prior year related to the EMS restructuring. The SSIA segment realized a decrease in cost of revenues of 1.3 percentage points mainly as a result of lower revenues attributable to a U.K. program completed in the third quarter of 2012 that
consisted of products with higher cost of revenues. Combined restructuring costs recorded in the three months ended August 31, 2013 were approximately $0.0 million compared to approximately $1.7 million in the comparable period of 2012 related
to the EMS restructuring.

General and Administrative Expenses

General and administrative expenses from continuing operations increased by approximately $0.3 million to $6.9 million for the three months
ended August 31, 2013 from $6.6 million for the three months ended August 31, 2012. The increase is primarily a result of an increase in amortization of intangible assets and higher accounting and legal services in the quarter. As a
percentage of sales, general and administrative expenses were 11.0% for the three months ended August 31, 2013, compared to 11.3% for the three months ended August 31, 2012.

The major components of general and administrative expenses are as follows:

(dollar amounts in thousands)Three months ended August 31

2013

% ofsales

2012

% ofsales

Depreciation and Amortization

$

2,652

4.2

%

$

1,917

3.3

%

Accounting and Administration

$

1,346

2.1

%

$

1,302

2.2

%

Stock based compensation

$

191

0.3

%

$

409

0.7

%

Professional Services

$

785

1.3

%

$

186

0.3

%

Selling Expenses

Selling expenses from continuing operations decreased to approximately $3.5 million for the three months ended August 31, 2013 from
approximately $3.6 million for the three months ended August 31, 2012. The decrease was largely due to a reduction in the mix of products sold that were subject to commissions. As a percentage of sales, selling expenses were 5.6% for the three
months ended August 31, 2013, compared to 6.1% for the three months ended August 31, 2012.

The major components of selling
expenses are as follows:

(dollar amounts in thousands)Three months ended August 31

2013

% ofsales

2012

% ofsales

Payroll Expense  Sales

$

1,931

3.1

%

$

1,764

3.0

%

Commissions

$

1,042

1.7

%

$

1,121

1.9

%

Advertising

$

224

0.4

%

$

132

0.2

%

Research and Development Expenses

Research and development costs from continuing operations decreased to approximately $2.2 million for the three months ended August 31,
2013 compared to approximately $2.5 million for the three months ended August 31, 2012. The decrease was largely due to cost reductions following restructuring initiatives. As a percentage of sales, research and development expenses were 3.6%
for the three months ended August 31, 2013, compared to 4.3% for the three months ended August 31, 2012.

Business acquisition and related
charges

Business acquisition charges primarily represent costs of engaging outside legal, accounting, due diligence, business
valuation consultants and accelerated stock option expenses related to business combinations or divestitures. For the three months ended August 31, 2013, business acquisition charges of approximately ($0.1) million primarily related to actual
costs being lower than previously estimated related to the sale of the Sensors operations, compared to approximately $0.8 million for the three months ended August 31, 2012, which primarily related to the C-MAC and RTIE acquisitions.

Operating Income

We recorded operating
income from continuing operations for the three months ended August 31, 2013 of approximately $2.3 million compared to operating loss of approximately $1.2 million for the three months ended August 31, 2012. The increase in operating
income of approximately $3.5 million is primarily attributed to lower restructuring and acquisition costs, primarily related to the C-MAC acquisition and EMS restructuring in the quarter ended August 31, 2012.

Other Expenses (Income)

Total other
expense for the three months ended August 31, 2013 amounted to approximately $3.8 million, compared to other expense of $25.0 million for the three months ended August 31, 2012. The decrease in other expense in the three month period ended
August 31, 2013, compared to the comparable period in 2012 is largely attributable to the write-down of $20.5 million of goodwill related to our EMS segment and higher interest expense in the prior year due to higher debt levels.

Income taxes from continuing operations amounted to a net benefit of approximately $3.1 million for the three months ended August 31, 2013
compared to a net benefit of $0.6 million in the three months ended August 31, 2012. The benefit during the three months ended August 31, 2013, is primarily due to the federal and state benefit on losses from continuing operations and
foreign and state taxes incurred during the period. The current provision is greater than the statutory tax rate primarily due to valuation allowances placed upon the deferred tax assets. The prior year benefit related to the Companys release
of a portion of the valuation allowance as a result of acquiring Spectrum.

Income From Discontinued Operations

We recorded income from discontinued operations of approximately $5.3 million for the quarter ended August 31, 2013, compared to a loss
from discontinued operations of approximately $2.1 million in the same period of fiscal 2012. This income is attributable to the operations of and the gain on the sale of our Databus operations. During the three months ended August 31, 2013 we
recorded a gain on the sale of Databus of approximately $10.0 million. During the three months ended August 31, 2012, we recorded a goodwill impairment of approximately $3.8 million attributable to Sensors operations, partially offset by
the operations of Sensors.

Net Income (Loss)

We recorded net income for the three months ended August 31, 2013 of approximately $7.0 million, compared to a net loss of approximately
$27.7 million for the three months ended August 31, 2012. The increase in net income is largely due to the net gain on the sale of discontinued operations of approximately $10.0 million in the quarter ended August 31, 2013, lower expenses
including restructuring and acquisition related costs of approximately $2.7 million in the quarter ended August 31, 2013 compared to the same period in 2012, and the write-down of $20.5 million of goodwill related to our EMS segment and
higher interest costs during the quarter ended August 31, 2012.

Results of Operations for the Nine Months Ended August 31, 2013 and 2012

The following discussion of results of operations is a comparison of our nine months ended August 31, 2013 and 2012.

Operating Revenue

(dollar amounts in thousands)Nine months ended August 31

2013

2012

%Change

Revenues by segments (from continuing operations):

SSC

$

128,112

$

121,241

5.7

%

EMS

44,362

48,642

(8.8

)%

SSIA

12,689

19,131

(33.7

)%

$

185,163

$

189,014

(2.0

)%

We recorded a 2.0% decrease in overall revenues for the nine months ended August 31, 2013 over the same
period in 2012. The decrease is mainly attributed to the decrease in revenues in our EMS and SSIA segments. During the nine months ended August 31, 2013, the decrease in the SSIA segment revenues results primarily from lower revenue generated
by our operations in the U.K. and Canada as a result of the completion of one U.K. program in the third fiscal quarter of 2012 and in Canada from lower revenue from several existing customers. The decrease in our EMS segment revenues resulted
primarily from lower revenues to the defense end market.

Our combined gross margin for the nine months ended August 31, 2013 increased by
approximately 3.6 percentage points compared to the nine months ended August 31, 2012. Gross margin varies from period to period and can be affected by a number of factors, including material costs, product mix, production efficiency, and
restructuring activities. Overall cost of revenues from continuing operations as a percentage of sales decreased in the nine months ended August 31, 2013 from 81.1% to 77.5% compared to the same period last year. The SSC segment cost of
revenues increased by 3.5 percentage points compared to the same period in 2012, primarily due to the impact of a change in product mix in the nine months ended August 31, 2013, as we shipped products on certain programs with higher costs of
revenues. The EMS segment cost of revenues for the nine months ended August 31, 2013 decreased by 22.6 percentage points compared with the same period in 2012 primarily as a result of restructuring charges taken in the prior year related to the
EMS restructuring. The SSIA segment cost of revenues for the nine months ended August 31, 2013 remained consistent with the comparable period of fiscal 2012. Combined restructuring costs recorded in the nine months ended August 31, 2013
were approximately $0.2 million compared to approximately $9.0 million in the comparable period of 2012, primarily related to the EMS restructuring.

General and Administrative Expenses

General and administrative expenses from continuing operations increased to approximately $19.7 million for the nine months ended
August 31, 2013 from $18.3 million for the nine months ended August 31, 2012. The increase is primarily a result of the addition of C-MAC, including the amortization of intangibles, for the full nine month period compared to March to
August 2012 in the comparable period of fiscal 2012, which increased general and administrative expenses by approximately $1.2 million, partially offset by cost reductions following restructuring initiatives. As a percentage of sales, general and
administrative expenses were 10.6% for the nine months ended August 31, 2013, compared to 9.7% for the nine months ended August 31, 2012.

The major components of general and administrative expenses are as follows:

(dollar amounts in thousands)Nine months ended August 31

2013

% ofsales

2012

% ofsales

Depreciation and Amortization

$

7,949

4.3

%

$

6,873

3.6

%

Accounting and Administration

$

4,176

2.3

%

$

3,738

2.0

%

Stock based compensation

$

791

0.4

%

$

1,769

0.9

%

Professional Services

$

1,939

1.0

%

$

1,617

0.9

%

Selling Expenses

Selling expenses from continuing operations increased to approximately $11.3 million for the nine months ended August 31, 2013 from
approximately $10.8 million for the nine months ended August 31, 2012. The increase was primarily a result of the addition of C-MAC for the full nine month period compared to March to August 2012 in the comparable period of fiscal 2012, which
increased selling expenses by approximately $0.2 million, and the mix of sales to more products that are subject to commissions. As a percentage of sales, selling expenses were 6.1% for the nine months ended August 31, 2013, compared to 5.7%
for the nine months ended August 31, 2012.

The major components of selling expenses are as follows:

(dollar amounts in thousands)Nine months ended August 31

2013

% ofsales

2012

% ofsales

Payroll Expense  Sales

$

5,991

3.2

%

$

5,491

2.9

%

Commissions

$

3,509

1.9

%

$

3,258

1.7

%

Advertising

$

810

0.4

%

$

446

0.2

%

Research and Development Expenses

Research and development costs from continuing operations decreased to approximately $6.9 million for the nine months ended August 31,
2013 compared to approximately $7.3 million for the nine months ended August 31, 2012. The decrease was largely due to cost reductions following restructuring initiatives. As a percentage of sales, research and development expenses were 3.7%
for the nine months ended August 31, 2013 and 3.9% for the nine months ended August 31, 2012.

Business acquisition charges primarily represent costs of engaging outside legal, accounting, due diligence, business valuation consultants and
accelerated stock option expenses related to business combinations or divestitures. For the nine months ended August 31, 2013, business acquisition charges of approximately $1.0 million primarily related to the sale of the Databus and Sensors
operations compared to approximately $3.4 million for the nine months ended August 31, 2012, which primarily related to the C-MAC and RTIE acquisitions.

Operating Income

We recorded operating
income from continuing operations for the nine months ended August 31, 2013 of approximately $2.1 million compared to an operating loss of approximately $8.8 million for the nine months ended August 31, 2012. The increase in operating
income of approximately $10.9 million is primarily attributed to lower restructuring and acquisition costs, primarily related to the C-MAC acquisition and EMS restructuring in the nine months ended August 31, 2012, partially offset by lower
contribution margin due to lower revenues and higher amortization of intangible assets following the C-MAC acquisition.

Other Expenses (Income)

Total other expense for the nine months ended August 31, 2013 amounted to approximately $23.5 million, compared to other expense
of $131.9 million for the nine months ended August 31, 2012. The decrease in other expense in the nine month period ended August 31, 2013, compared to the comparable period in 2012 is largely attributable to the write-down of $107.5
million of goodwill related to our EMS segment and approximately $12.6 million of discounts related to the convertible subordinated note that converted to shares of Series A Preferred Stock during the quarter ended August 31, 2012 (the
Note), partially offset by the reduction of $2.2 million from previously accrued earn-out payments related to the SenDEC acquisition and the write-down of discounts and deferred financing costs of $10.3 million in the nine months ended
August 31, 2013.

Income Taxes

Income taxes from continuing operations amounted to a net benefit of approximately $3.3 million for the nine months ended August 31, 2013
compared to a net benefit of $4.9 million in the nine months ended August 31, 2012. The benefit during the nine months ended August 31, 2013, is primarily due to the federal and state benefit on losses from continuing operations and the
tax amortization of indefinite lived intangibles, alternative minimum tax and foreign and state taxes incurred during the period. The current provision is less than the statutory tax rate due to valuation allowances placed upon the deferred tax
assets. The prior year benefit related to the Companys release of a portion of the valuation allowance as a result of acquiring Spectrum.

Income
From Discontinued Operations

We recorded income from discontinued operations of approximately $18.1 million for the nine months ended
August 31, 2013, compared to a loss from discontinued operations of approximately $0.5 million in the same period of fiscal 2012. This increase in income is attributable to the operations of and the gain on the sales of our Databus assets and
Sensors operations. During the nine months ended August 31, 2013 we recorded gains on the sales of Databus and Sensors of approximately $10.0 million and $11.8 million, respectively.

Net Loss

We recorded net income for the
nine months ended August 31, 2013 of approximately $0.0 million, compared to a net loss of approximately $136.4 million for the nine months ended August 31, 2012. The decrease in net loss is largely due to the write-down of $107.5 million
of goodwill related to our EMS segment in the nine months ended August 31, 2012, the gains on the sale of discontinued operations of approximately $21.9 million in the nine months ended August 31, 2013, and lower expenses including
restructuring and acquisition related costs of approximately $15.0 million and a lower write-down of approximately $2.4 million of discounts and deferred financing costs during the nine months ended August 31, 2013, compared to the nine months
ended August 31, 2012, partially offset by lower contribution margin due to lower revenues in the nine months ended August 31, 2013.

Our sources of
capital include cash flows from operations, available credit facilities and the issuance of equity securities.

At August 31, 2013,
we held cash and cash equivalents of approximately $12.5 million compared to $20.5 million at November 30, 2012. We believe that (i) our available cash and cash equivalents, (ii) funds available under our Revolving Loan Agreement as
described below, and (iii) future cash flows from operations will be sufficient to satisfy our anticipated cash requirements for the next twelve months, including scheduled debt repayments, lease commitments, planned capital expenditures, and
research and development expenses. There can be no assurance, however, that unplanned capital replacements or other future events, will not require us to seek additional debt or equity financing and, if so required, that it will be available on
terms acceptable to us, if at all. Any issuance of additional equity could dilute our current stockholders ownership interests.

Term Loan
Agreement and Revolving Loan Agreement

On February 6, 2013, in connection with entering into the Term Loan Agreement and the
Revolving Loan Agreement, the Amended and Restated Credit Agreement, dated as of June 27, 2011 and amended on January 6, 2012 and March 22, 2012, by and among the lenders from time to time party thereto and Morgan Stanley Senior
Funding, Inc., as administrative agent, lead arranger and sole book-runner (the Credit Agreement) was paid off and terminated.

As of August 31, 2013, $87.9 million was outstanding under the Term Loan Agreement and approximately $27.8 million was outstanding under
the Revolving Loan Agreement. As of August 31, 2013, we had $11.8 million available for future borrowings under the Revolving Loan Agreement.

Term Loan Agreement

The term loans
incurred pursuant to the Term Loan Agreement bear interest, at the Companys option, at the base rate plus 8.75% or an adjusted LIBOR rate (based on one, two or three-month interest periods) plus 9.75% for the first year and at the base rate
plus 9.75% or an adjusted LIBOR rate (based on one, two or three-month interest periods) plus 10.75% thereafter, with a LIBOR floor of 1.25%. For purposes of the Term Loan Agreement, the base rate means the highest of Wells Fargo Bank,
National Associations prime rate, the federal funds rate plus a margin equal to 0.50% and the adjusted LIBOR rate for a 3-month interest period plus a margin equal to 1.00%.

Interest is due and payable in arrears monthly for term loans bearing interest at the base rate and at the end of an interest period (or at
each three month interval in the case of term loans with interest periods greater than three months) in the case of term loans bearing interest at the adjusted LIBOR rate. Principal payments of the term loans are paid at the end of each of the
Companys fiscal quarters, commencing for the fiscal quarter ending May 31, 2013, with the balance of any outstanding term loans due and payable in full on February 6, 2018. The quarterly principal payments will amortize at 1.25% for
the fiscal quarters through the end of the Companys 2014 fiscal year, at 1.875% for the fiscal quarters through the end of the Companys 2015 fiscal year and at 2.50% for each of the fiscal quarters thereafter.

Under certain circumstances, we are required to prepay the term loans upon the receipt of cash proceeds of certain asset sales, cash proceeds
of certain extraordinary receipts and cash proceeds of certain debt or equity financings, and based on a calculation of annual excess cash flow. Mandatory prepayments resulting from assets sales or certain debt financings may require the payment of
certain prepayment premiums.

The term loans are secured by a second priority security interest in accounts receivable, inventory,
machinery, equipment and certain other personal property relating to the foregoing, and any proceeds from any of the foregoing, subject to certain exceptions and liens, and a first priority security position on substantially all other real and
personal property, in each case that are owned by the Company and the subsidiary guarantors.

The Term Loan Agreement contains customary
affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries ability to, among other things, incur indebtedness, grant liens, dispose of assets and pay dividends or make distributions to
stockholders, in each case subject to customary exceptions for a term loan of this size and type.

Pursuant to the Term Loan Agreement, the Company is required to maintain compliance with an
interest coverage ratio and a leverage ratio and to limit its annual capital expenditures to $4.0 million per fiscal year (subject to carry-over rights). The interest coverage ratio, which is defined as the ratio of Consolidated EBITDA to cash
Interest Expense (as each term as defined in the Term Loan Agreement), as at the end of each fiscal quarter of the Company, must be not less than the ratio set forth opposite such period below:

Applicable Ratio

Applicable Period

1.90:1.00

For the three quarter period ending on August 31, 2013

1.90:1.00

For the Test Period ending on November 30, 2013

2.10.1.00

For the Test Period ending on February 28, 2014

2.10.1.00

For the Test Period ending on May 31, 2014

2.20.1.00

For the Test Period ending on August 31, 2014

2.50.1.00

For the Test Period ending on November 30, 2014

The leverage ratio, which is defined as Funded Debt to Consolidated EBITDA (as each term as defined in the
Term Loan Agreement), as at the end of each fiscal quarter of the Company, must be not greater than the ratio set forth opposite such period below:

Applicable Ratio

Test Period Ending

5.50:1.00

August 31, 2013

5.50:1.00

November 30, 2013

4.10:1.00

February 28, 2014

4.00:1.00

May 31, 2014

3.85:1.00

August 31, 2014

3.85:1.00

November 30, 2014

As at August 31, 2013, the Company was in compliance with its financial covenants under the Term Loan
Agreement.

The Term Loan Agreement includes customary events of default including, among other things, non-payment defaults, inaccuracy
of representations and warranties, covenant defaults, cross default to material indebtedness, bankruptcy and insolvency defaults, non-compliance with ERISA laws and regulations, defaults under the security documents or guaranties, material judgment
defaults, and a change of control default, in each case subject to certain exceptions for a term loan of this type. The occurrence of an event of default could result in an increased interest rate equal to 2.0% above the applicable interest rate for
loans, the acceleration of the Companys obligations pursuant to the Term Loan Agreement and an obligation of the subsidiary guarantors to repay the full amount of the Companys borrowings under the Term Loan Agreement. If the Company were
unable to obtain a waiver for a breach of covenant and the lenders accelerated the payment of any outstanding amounts, such acceleration may cause the Companys cash position to deteriorate or, if cash on hand were insufficient to satisfy the
payment due, may require the Company to obtain alternate financing to satisfy the accelerated payment. If the Companys cash is utilized to repay any outstanding debt, we could experience an immediate and significant reduction in working
capital available to operate our business.

Revolving Loan Agreement

The revolving loans incurred pursuant to the Revolving Loan Agreement bear interest, at the Companys option, at the base rate plus a
margin between 1.50% and 2.00% or an adjusted LIBOR rate (based on one, two, three or six-month interest periods) plus a margin between 2.50% and 3.00%, in each case with such margin being determined based on the Companys average daily excess
availability under the revolving credit facility for the preceding fiscal quarter. For purposes of the Revolving Loan Agreement, the base rate means the highest of Wells Fargo Bank, National Associations prime rate, the federal
funds rate plus a margin equal to 0.50% and the adjusted LIBOR rate for a 3-month interest period plus a margin equal to 1.00%.

Interest
is due and payable in arrears monthly for revolving loans bearing interest at the base rate and at the end of an interest period (or at each three month interval in the case of loans with interest periods greater than three months) in the case of
revolving loans bearing interest at the adjusted LIBOR rate. Principal, together with all accrued and unpaid interest, is due and payable on February 6, 2018. The Company may prepay the revolving loans and terminate the commitments, in whole or
in part, at any time without premium or penalty. Under certain circumstances, we are required to prepay the revolving loans upon the receipt of cash proceeds of certain asset sales.

All borrowings under the Revolving Loan Agreement are limited by amounts available pursuant to a borrowing base calculation, which is based on
percentages of eligible accounts receivable, inventory, machinery and equipment, in each case subject to reductions for applicable reserves.

The Revolving Loan Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and
its subsidiaries ability to, among other things, incur indebtedness, grant liens, dispose of assets and pay dividends or make distributions to stockholders, in each case subject to customary exceptions for a credit facility of this size and
type.

Pursuant to the Revolving Loan Agreement, the Company is also required to maintain compliance
with a fixed charge coverage ratio and to limit its annual capital expenditures to $4.0 million per fiscal year (subject to carry-over rights) at such times that it fails to maintain excess availability under the revolving credit facility above a
specified level. The fixed charge coverage ratio, which is defined as the ratio of EBITDA minus unfinanced capital expenditures to Fixed Charges (as each term as defined in the Revolving Loan Agreement), as at the end of each fiscal quarter of the
Company, must be not less than the ratio set forth opposite such period below:

Applicable Ratio

Applicable Period

1.0:1.0

For the three quarter period ending August 31, 2013

1.0:1.0

For the four quarter period ending on the last day of each November, February, May or August thereafter

As at August 31, 2013, the Company was in compliance with its financial covenants under the Revolving
Loan Agreement.

The Revolving Loan Agreement contains customary events of default including, among others, non-payment defaults, defaults
due to an inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency defaults and a change of control default, in each case subject to customary exceptions for a credit facility of this size and type. The occurrence
of an event of default could result in an increased interest rate equal to 2.0% above the applicable interest rate for loans, the acceleration of the Companys obligations pursuant to the Revolving Loan Agreement, a termination of the
commitments under the Revolving Loan Agreement, an obligation by any guarantors to repay their respective obligations in full and the right of the lenders to exercise remedies with respect to any collateral securing the obligations under the
Revolving Loan Agreement. If the Company were unable to obtain a waiver for a breach of covenant and the lenders accelerated the payment of any outstanding amounts, such acceleration may cause the Companys cash position to deteriorate or, if
cash on hand were insufficient to satisfy the payment due, may require the Company to obtain alternate financing to satisfy the accelerated payment. If the Companys cash is utilized to repay any outstanding debt, we could experience an
immediate and significant reduction in working capital available to operate our business.

Nine Months Ended August 31, 2013 Compared to
August 31, 2012

Cash used by continuing operating activities of approximately $6.8 million for the nine months ended
August 31, 2013 (Q3 YTD FY2013) was higher than cash used by continuing operations of approximately $2.1 million for the nine months ended August 31, 2012 (Q3 YTD FY2012). The increase in cash used by operating
activities resulted primarily from an increase in the net cash used by changes in operating assets and liabilities during Q3 YTD FY2013, which was primarily related to changes in inventory, accounts payable and accounts receivable.

Cash generated by investing activities for the nine months ended August 31, 2013 was approximately $77.3 million, which consisted
primarily of the net proceeds of $31.4 million for the sale of the Databus assets, $49.1 million for the sale of the Sensors operations and $0.8 million net proceeds for the sale of certain land and a building in Palm Bay, Florida, and net proceeds
of $0.1 million from a negotiated reduction in the final payment made in the quarter for the CMT acquisition that was previously held as restricted cash, partially offset by the acquisition of fixed and intangibles assets and restricted cash of $1.5
million related to the sale of Sensors. Cash used by investing activities for the nine months ended August 31, 2012 was approximately $30.5 million, which consisted of approximately $29.0 million used for the purchase of C-MAC and RTIE and $1.9
million from the acquisition of fixed and intangible assets, partially offset by proceeds on the sale of fixed assets of approximately $0.5 million from the sale of the St. Marys, Pennsylvania land and building, which was a part of the Sensors
operations.

Cash used by financing activities for the nine months ended August 31, 2013 totaled approximately $80.7 million, and
resulted from the repayment of long-term debt, mainly related to the term loans under the Credit Agreement using the majority of the proceeds from the sale of Databus and Sensors, and the Lockman Electronic Holdings Limited loan, partially offset by
net proceeds associated with the loans under the Term Loan Agreement and the Revolving Loan Agreement. Cash generated by financing activities for the nine months ended August 31, 2012 totaled approximately $27.6 million, and resulted from the
net proceeds associated with term loans under the Credit Agreement and the Note, partially offset by the repayment of long-term debt, mainly related to the term loans under the Credit Agreement.

Future cash payments required under debt arrangements, operating leases, unconditional purchase obligations pursuant to material contracts
entered into by the Company in the normal course of business, and capital leases as of August 31, 2013 are summarized in the following table.

Payments Due by Period

(dollar amounts in thousands)

Total

Remainderof 2013

2014

2015

2016

2017

Thereafter

Operating lease obligations (a)

$

15,936

$

1,035

$

3,720

$

2,742

$

2,387

$

2,196

$

3,856

Long-term debt obligations (b)

117,557

1,619

5,052

7,177

9,441

9,057

85,211

Estimated interest payments

45,315

7,912

10,112

9,448

8,536

7,536

1,771

Asset retirement obligations (c)

1,056











1,056

Other contractual obligations (d)

37,167











37,167

Total

$

217,031

$

10,566

$

18,884

$

19,367

$

20,364

$

18,789

$

129,061

Note: Deferred tax liabilities are omitted from this schedule because their ultimate payoff date cannot be reasonably
established given the long-term nature of this obligation.

(a)

As described in Note 20 (a) to the consolidated financial statements included in the Companys Annual Report on Form 10-K for the fiscal year ended November 30, 2012.

(b)

As described in Note 11 to the consolidated financial statements included in this Quarterly Report on Form 10-Q.

(c)

As described in Note 13 to the consolidated financial statements included in the Companys Annual Report on Form 10-K for the fiscal year ended November 30, 2012.

(d)

Other contractual obligations relate to the redeemable preferred stock as described in Note 12 to the consolidated financial statements included in this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

We describe our significant accounting policies in Note 2 to the unaudited consolidated financial statements in Item 1 of this Report and
the effects of recently adopted accounting pronouncements in Note 3 to the unaudited consolidated financial statements in Item 1 of this Report. There were no significant changes in our accounting policies or critical accounting estimates that
are discussed in our Annual Report on Form 10-K for the year ended November 30, 2012.

Off-Balance Sheet Arrangements

During the year ended November 30, 2012 and the nine months ended August 31, 2013, the Company did not have any off-balance sheet
arrangements.

FORWARD-LOOKING STATEMENTS

This document and the documents incorporated in this document by reference contain forward-looking statements that are subject to risks and
uncertainties. All statements other than statements of historical fact contained in this document and the materials accompanying this document are forward-looking statements.

The forward-looking statements are based on the beliefs of management, as well as assumptions made by and information currently available to
management. Frequently, but not always, forward-looking statements are identified by the use of the future tense and by words such as believes, expects, anticipates, intends, will,
may, could, would, projects, continues, estimates or similar expressions. Forward-looking statements are not guarantees of future performance and actual results could differ
materially from those indicated by the forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the Company or its industrys actual results, levels of activity,
performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements.

The forward-looking statements contained or incorporated by reference in this document are
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (Securities Act) and Section 21E of the Exchange Act and are subject to the safe harbor created by the Private Securities Litigation
Reform Act of 1995. These statements include declarations regarding our plans, intentions, beliefs or current expectations.

Management
wishes to caution investors that any forward-looking statements made by or on behalf of the Company are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Among the important factors
that could cause actual results to differ materially from those indicated by forward-looking statements are the risks and uncertainties described under Risk Factors in our Annual Report on Form 10-K for the year ended November 30,
2012 and in our other filings with the SEC. These uncertainties and other risk factors include, but are not limited to: changing economic and political conditions in the United States and in other countries, the ability to effectively integrate
acquired companies, our ability to maintain compliance with our financial covenants, war, changes in governmental spending and budgetary policies, governmental laws and regulations surrounding various matters such as environmental remediation,
contract pricing, and international trading restrictions, customer product acceptance, continued access to capital markets, and foreign currency risks.

Management wishes to caution investors that other factors might, in the future, prove to be important in affecting the Companys results
of operations. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors,
may cause actual results to differ materially from those contained in any forward-looking statements.

Forward-looking statements are
expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this document are made as of the date of this document and management does not undertake any obligation to update forward-looking
statements to reflect new information, subsequent events or otherwise.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency

Certain of our European sales and related selling expenses are denominated in Euros, British Pounds Sterling, and other local currencies. In
addition, certain of our operating expenses are denominated in Canadian dollars, Mexican Pesos and Chinese Yuan. As a result, fluctuations in currency exchange rates may affect our operating results and cash flows. For each of the periods presented
herein, realized currency exchange rate gains and losses were not material.

Interest Rate Exposure

We have market risk exposure relating to possible fluctuations in interest rates. We may utilize interest rate swap agreements in the future to
minimize the risks and costs associated with variable rate debt, however, we have not done so to date. We do not enter into derivative financial instruments for trading or speculative purposes.

ITEM 4.

CONTROLS AND PROCEDURES

Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures.

We maintain disclosure controls
and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. We have carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of August 31, 2013. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of August 31, 2013.

(b)

Changes in Internal Control over Financial Reporting

During the quarter ended
August 31, 2013, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Information with respect to legal proceedings can be found in Note 17
Commitments and Contingencies to the Consolidated Financial Statements contained in Part I, Item 1 of this report, which is incorporated by reference herein.

ITEM 1A.

RISK FACTORS

There are no material changes from the risk factors set forth under Part
I, Item 1ARisk Factors in our Annual Report on Form 10-K for the year ended November 30, 2012.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

API TECHNOLOGIES CORP.

Date: October 9, 2013

By:

/S/ PHIL REHKEMPER

Phil Rehkemper

Chief Financial Officer

(Duly Authorized Officer)

44

EX-31.1
2
d591441dex311.htm
EX-31.1
EX-31.1

Exhibit 31.1

Rule 13a-14(a)

CERTIFICATION

I, Bel Lazar, hereby
certify that:

1.

I have reviewed this quarterly report on Form 10-Q of API Technologies Corp.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

4.

The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5.

The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record,
process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Date: October 9, 2013

/s/ Bel Lazar

Bel Lazar

Chief Executive Officer

EX-31.2
3
d591441dex312.htm
EX-31.2
EX-31.2

Exhibit 31.2

Rule 13a-14(a)

CERTIFICATION

I, Phil Rehkemper, hereby
certify that:

1.

I have reviewed this quarterly report on Form 10-Q of API Technologies Corp.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

4.

The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5.

The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record,
process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

Date: October 9, 2013

/s/ Phil Rehkemper

Phil Rehkemper

Chief Financial Officer

EX-32.1
4
d591441dex321.htm
EX-32.1
EX-32.1

Exhibit 32.1

Section 1350

CERTIFICATION

In
connection with the Quarterly Report of API Technologies Corp. (the Company) on Form 10-Q for the period ending August 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I,
Bel Lazar, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Bel Lazar

Bel Lazar

Chief Executive Officer

October 9, 2013

EX-32.2
5
d591441dex322.htm
EX-32.2
EX-32.2

Exhibit 32.2

Section 1350

CERTIFICATION

In
connection with the Quarterly Report of API Technologies Corp. (the Company) on Form 10-Q for the period ending August 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report) I,
Phil Rehkemper, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.